🚨 NVIDIA's CEO JUST EXPLAINED WHY MARKETS ARE IN TROUBLE RIGHT NOW...

Stocks, gold, silver, and Bitcoin all fell today. Oil went the other way, reaching its highest level since May.

Meanwhile, Nvidia CEO Jensen Huang said in a TV interview that demand for AI is enormous, but t that demand is harder to find.

That's a telling comment from the company selling the chips behind the AI boom.

The demand is there. Financing it is becoming the problem.

Two things help explain why: war and the AI spending race.

First, the war.

Since the Iran war began on February 28, oil shipments through the Strait of Hormuz still haven't returned to normal. Tensions rose again this week, pushing Brent above $110.

Higher oil prices are feeding inflation. U.S. inflation reached 3.7% in September, with gasoline accounting for more than half of the monthly increase.

The Fed responded by raising rates for the first time in three years.

Before the war, the U.S. 10-year Treasury yield was 3.97%. This month, it climbed above 5.30%.

That makes borrowing more expensive across the economy, just as AI companies need more money than ever.

Which brings us to the second problem: how the AI boom is being funded.

Big tech companies are borrowing more. Investors are also borrowing to buy AI stocks.

And some of the industry's biggest deals involve companies financing their own customers.

The IMF examined 14 major AI deals announced since 2023. Big tech companies invested $300 billion in financially weaker AI businesses and lent them another $650 billion.

Those businesses, in turn, committed to buying $1.4 trillion in products and services from the larger companies.

Think of a car dealer lending someone money to buy a car from that same dealership.

The dealer books a sale, but it also provided the money that made the sale possible. If the customer runs into trouble, both the loan and future sales are at risk.

That's why strong AI demand doesn't automatically mean the financing is sustainable.

Meta's results yesterday showed how expensive this race has become. It spent $34.9 billion on investment in just three months, more than it generated in cash from operations.

It also announced an additional share class that could be used to raise money.

The problem is straightforward: AI companies need more cash while the cost of borrowing keeps rising.

Businesses that depend most on outside funding are especially vulnerable.

That helps explain why chipmakers and AI stocks took such a heavy hit. And because these companies now make up such a large share of major indexes, their losses pull the wider market down.

South Korean stocks fell 3.5%, Hong Kong lost 3%, and Japan dropped 2.7%. The Nasdaq fell more than 2% during the session.

Borrowed money can make the selling worse.

U.S. margin debt reached a record $1.5 trillion in June. When stocks bought with borrowed money fall, investors can face demands for more collateral. Some then sell other assets to cover the shortfall.

That's one reason different markets can fall together.

Gold dropped below $4,100, more than 25% below its January record. Silver is trading below half its record high. Bitcoin fell below $81,000.

U.S. Treasuries rose as investors sought safety, bringing the 10-year yield back toward 5%. But borrowing costs remain far above pre-war levels.

The next few weeks matter:

→ October 28: Fed rate decision. No change is expected.
→ October 30: Bank of Japan decision, with most economists expecting its next hike in December.
→ November 3: U.S. elections. The New York Times reports that further action on Iran has been postponed until afterward.
→ Around November 18: Nvidia earnings, offering another look at AI demand and spending.
→ December 9: Fed decision, with markets pricing roughly a 90% chance of a hike.

The bigger question is whether AI spending can keep growing with money this expensive.

In the IMF's downside scenario, a sharp slowdown in AI investment would hit asset prices and leave the global economy 1.1% smaller than otherwise expected by 2028.

Huang said the funding shortage would be resolved. He didn't explain how.

For years, cheap money helped finance bigger investments and bigger bets. Today, lenders can demand more, and borrowers have less room for error.

The danger is what happens when those enormous bets rely on debt, financing gets tighter, and investors all need cash at once.