The AI Fire Drill Proved Real, and Oil Caught Fire.
Monday’s opener asked whether this week’s earnings could call off the AI fire drill, the scare that began when AI stocks broke last week. They could not. Meta and Lam Research beat on the numbers and were sold anyway, and the Nasdaq 100 fell 2.7% on Thursday as Reuters reported the cost of insuring Meta’s debt hit a record. Oil climbed as the Middle East heated up, and NBC reported Wednesday that the U.S. had begun pulling troops back from Gulf bases. Flaws in PHP, the programming language behind much of the web, forced websites offline around the world on Wednesday. The odds of a Fed rate hike fell all week and stocks fell anyway, so the AI fire drill proved real.
Earnings did not calm the AI trade, and oil kept climbing.
Stocks rose through Wednesday, with SpaceX jumping after its report. The reports after Wednesday’s close changed the mood, and the Nasdaq 100 fell 2.7% on Thursday, measured on OKX. Friday brought more selling as oil climbed. The S&P 500 lost 0.8% since Monday’s opener. The Nasdaq 100 lost 1.9%.
Bitcoin rose toward $84,900 on Wednesday, then gave it back and finished below Monday, while Ethereum ended about where it began. Gold and silver sold off all week, with silver down 5.8%.
Crude on the OKX perpetual dipped to $95.33 on Tuesday morning, then climbed all week to $103.36 and set its high of $103.94 in Friday’s last hour of regular trading. FedWatch, the CME tool that turns futures prices into rate odds, shows December hike odds falling to 74.2% even as oil rose. Section 03 has the reasons.
What the week’s reports came in at, and how markets took them.
Stock figures are OKX perpetual prices. Night of earnings is the 8pm ET move on the day the company reported, and day after earnings is the next day’s close, both against the close on the report day. 7-day funding is what holders of the perpetual paid or collected over the week. Ranges can run wider than the stock’s own in thin after-hours trading.
The AI fire drill proved real, as spending fears, Middle East heat and a cyber scare hit together.
The trigger was the rising cost of building AI. Meta reported strong sales, then said it has committed about $825 billion to leases and contracts, much of it for AI computing, and raised the low end of its spending plan for this year. Investors worry that Meta and its peers will have to borrow heavily to pay for it. Reuters reported Thursday that the price of insuring Meta’s debt against default hit a record, and Bloomberg reported that the same price rose for Oracle, Microsoft and Broadcom.
Oil added heat. Iran said Tuesday that tankers hit mines near the Strait of Hormuz, the waterway that carries about a fifth of the world’s oil, and crude on the OKX perpetual fell more than $5 that morning on reports of U.S.-Iran talks. After that, Iran-backed Houthi rebels in Yemen stepped up attacks on Saudi Arabia, and Saudi Aramco, the state oil company, evacuated its Dhahran headquarters on Thursday for the first time since the Iran war began. NBC reported Wednesday that the U.S. had begun moving troops out of bases in Jordan, Qatar and Kuwait and cutting diplomatic staff while President Trump weighs new strikes on Iran. In reports through Thursday, the State Department had ordered non-emergency staff out of Saudi Arabia, and a spokesman called reports of wider withdrawals inaccurate.
A security scare piled on. PHP is a programming language that runs a huge share of websites, and two critical flaws in it let attackers take over a server without logging in. Governments and companies took sites offline on Wednesday to install fixes. AI helped researchers find the flaws, and attackers were trying to use them before the fixes landed, with millions of attempts reported, though Thursday’s reports said no widespread breach had been confirmed. Cybersecurity stocks rallied, with CrowdStrike and Cloudflare each up about 9% on OKX over the 24 hours to Friday evening.
Our read is that the AI trade now moves on how it gets paid for, not just on how fast it grows. The Fed was not the pressure, since hike odds fell all week, so the stress came from debt, oil and security fears.
Two of Monday’s three paths played out together.
Monday’s opener laid out three paths: earnings that show AI spending paying off, earnings that disappoint, and Middle East headlines taking over. Two of the three arrived together. The reports disappointed on cost, not on growth, and the Middle East headlines took oil higher, while the Fed’s hike odds fell the whole time. The path where earnings steadied the AI trade did not happen.
The question heading into the Fed’s Wednesday decision is whether the December hike stays the plan.
Three Academy lessons, run against this week’s real numbers.
Earn means buying the coin and selling the perpetual contract against it to collect funding. Borrow means raising cash against Bitcoin you keep, and the cost is the funding you pay. Earners got more than Monday for the second issue in a row. The latest day paid 10.9%, above the 7-day average, so the improvement is still under way. Deribit stays the cheapest place to borrow, at 4.0% on average. The latest day cost 4.7%, above that average, so borrowing is edging back up. Over the past 30 days the cost averaged 3.7%.
A covered call is when you hold a coin and sell someone the right to buy it from you at a higher price, collecting a fee up front, so your gain stops at that price. At the same strikes as Monday, yields fell, 10.1% against 12.1% on Bitcoin and 21.5% against 23.2% on Ethereum. With five fewer days to expiry, the fees are smaller, and the Bitcoin strike sits farther out of the money than Monday because Bitcoin edged down.
| Call | Strike | OTM | Fee per coin | Annualized yield |
|---|---|---|---|---|
| Bitcoin | $91,000 | 11.9% | $772.83 | 10.1% |
| Bitcoin, wider | $92,000 | 13.1% | $650.80 | 8.5% |
| Ethereum | $2,700 | 12.5% | $48.60 | 21.5% |
| Ethereum, closer | $2,650 | 10.4% | $58.80 | 26.0% |
| Annualized funding | 1-day | 7-day | 14-day | 30-day |
|---|---|---|---|---|
| WTI crude (long side) | -32.99% | -17.50% | -26.13% | -21.36% |
| Natural gas (short side) | +2.03% | +11.54% | +98.23% | +129.68% |
The WTI against Natural Gas spread, long oil and short natural gas, is a funding-carry trade rather than a directional bet. On price, the trade kept working: oil gained even more ground on natural gas over the last 100 hours, and the ratio is well above Monday’s reading. The funding side paid far less, though. The roll, when the contracts switch to next month’s version between the fifth and tenth business day, is finished, and the heaviest roll days have aged out of the 7-day window.
The pairs below track stocks. Intel against Tesla is the earner-versus-spender rotation, whether the market favors companies profiting from the AI buildout over those spending heavily on it. SanDisk is a flash memory maker and Dell a computer maker. Tesla and Dell gained ground on their pairs, while Bitcoin kept its edge on QQQ because QQQ fell more.
| Pair | Now | Monday | Gaining ground, 100 hours |
|---|---|---|---|
| Intel vs. Tesla | 0.2335 | 0.2515 | Tesla |
| SanDisk vs. Dell | 2.71 | 3.02 | Dell |
| Bitcoin vs. QQQ | 115.16 | 113.91 | Bitcoin |
Oil rallied, while tech, gold and silver fell.
On Hyperliquid, WTI crude open interest jumped 51% to $216M as price rose, a sign of fresh longs. Bitcoin saw the biggest liquidations, $54.09M of longs and $39.12M of shorts.
| Asset | Backdrop | Open interest change | Volume | Longs liquidated | Shorts liquidated |
|---|---|---|---|---|---|
| Bitcoin | fresh shorts opening | +11.72%$3.6B open | $10.43B | $54.09M | $39.12M |
| Ethereum | flat | +0.49%$2.6B open | $3.34B | $8.11M | $21.53M |
| WTI crude | fresh longs opening | +50.59%$216M open | $982M | $444.0K | $1.90M |
| Gold | fresh shorts opening | +29.50%$337M open | $252M | $2.92M | $0 |
| Silver | fresh shorts opening | +9.98%$169M open | $453M | $4.34M | $189.8K |
| Nasdaq 100the index QQQ tracks | longs giving up | -4.13%$284M open | $1.10B | $415.1K | $58.3K |
| S&P 500the index SPY tracks | fresh shorts opening | +2.37%$383M open | $1.20B | $756.0K | $1.91M |
Hyperliquid is a different exchange from the prices above, so its numbers will not match them exactly. Nasdaq 100 and S&P 500 are the indexes that QQQ and SPY track. Hyperliquid lists the indexes themselves and has no QQQ or SPY market.
Open interest is the number of contracts still open, measured in contracts so price moves do not distort it. Volume is the dollar value of all trades over the same window, estimated from Hyperliquid’s one-minute price data. A backdrop needs price and open interest to each move 0.5% or more: open interest up with price down is fresh shorts opening, both down is longs giving up, open interest down with price up is shorts covering, and smaller moves read flat. A liquidation is a position an exchange force-closes because the trader can no longer cover the losses. Longs liquidated are traders betting on a rise who were forced out as price fell, and shorts liquidated are the reverse.
Bitcoin funds took in money for the week through Thursday, but Thursday brought their biggest outflow since at least early October.
A Bitcoin ETF is a fund big investors use to get exposure to Bitcoin without holding it directly. When money flows into the fund, that usually means institutions are buying. When money flows out, that usually means they are selling. Tracking that separately from price shows whether a move came from real buying and selling pressure. Through Thursday the funds took in about $443 million, a turnaround from the $146 million they lost over the same days last week. Monday and Wednesday brought inflows of $526.60 million and $528.40 million, and Thursday, the day of the Nasdaq selloff, brought a $635.49 million outflow.
Ethereum funds lost about $225 million through Thursday, a little less than the $250 million they lost over the same days last week. Wednesday’s $14.96 million was their only inflow day, and they sold on the other three. Friday’s figure posts after the close, so the next opener closes that loop.
Spending fears, oil and the Middle East moved prices. Next week brings the Fed and the biggest AI earnings.
Bitcoin finished slightly lower after a midweek rally faded, and it traded with tech through the selloff. Next week’s reports from Alphabet, Microsoft and Amazon, and the Fed’s Wednesday decision, can move it again.
Middle East headlines can gap oil at any hour. On Hyperliquid, fresh shorts opened in Bitcoin, gold, silver and the S&P 500, and crowded shorts can squeeze quickly if headlines turn. Oil and natural gas funding has cooled now that the monthly switch to the next contract is over.
The AI trade now moves on how it gets paid for, and a lot lands next week. Waiting to see how it lands before choosing a direction is a position too.
This content is produced by Harmonic for educational purposes. It is strategy education, not investment advice.