To The Moon

21 Aug 2026 — Daily Market Update

U.S. stocks fell as higher Treasury yields, rising oil prices and concerns over consumer spending weighed on sentiment. At the same time, the latest developments from Alibaba, Broadcom, Microsoft and Micron show that AI investment is still accelerating — but investors are increasingly focused on whether these massive investments can generate sufficient returns and how they will be financed.

S&P 500: -0.87% to 7,641.16

Dow Jones: -1.32% to 52,759.21

Nasdaq: -1.00% to 26,067.17

U.S. 2Y Treasury: roughly flat at 4.19%

U.S. 10Y Treasury: +4 bps to around 4.70%

U.S. 30Y Treasury: around 5.24%

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1. Alibaba: AI monetisation is improving, but cash flow remains under pressure

Alibaba’s quarterly revenue rose about 9% YoY, slightly above expectations, while AI and cloud revenue increased 45%.

More importantly, AI-related product ARR has exceeded RMB 49.5bn, showing that AI is becoming a meaningful recurring revenue stream rather than just a future growth story.

However, Alibaba’s capex surged 75% YoY to around RMB 67.7bn as the company continues to invest heavily in AI chips, servers and data centres.

The positive development is profitability. AI cloud EBITDA more than doubled, with margins rising to around 12%, suggesting the business is beginning to move from the investment phase into the monetisation phase.

Alibaba’s in-house T-Head chips are also reportedly being used by more than 650 customers, potentially lowering its reliance on external GPUs and improving computing economics.

Management believes incremental AI capex could generate payback within roughly three years.

Market impact: Heavy capex and weaker free cash flow may continue to pressure Alibaba’s valuation in the near term.

Positive counter: AI revenue, ARR and margins are all improving simultaneously, providing stronger evidence that Alibaba’s AI spending is starting to produce measurable returns.

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2. Hormuz tensions remain, but oil flows are partially recovering

The U.S. has reportedly carried out covert operations aimed at keeping oil moving through the Strait of Hormuz.

Around 15–20 tankers per night may now be able to use the route, helping restore part of the disrupted Gulf oil supply.

At the same time, the UAE has tightened trade and financial restrictions on Iran, adding pressure on one of Tehran’s most important regional trading channels.

Dubai has historically served as a major transit and financial hub for Iranian imports, meaning restrictions through the UAE could have a significant economic impact.

The situation therefore represents a two-sided pressure campaign: maintaining enough oil flow to protect global supply while simultaneously tightening economic pressure on Iran.

Oil prices nevertheless remained elevated, keeping inflation concerns alive.

Market impact: Sustained high oil prices would increase inflation pressure and could push long-term bond yields higher, which is negative for high-valuation technology and growth stocks.

Positive counter: The partial restoration of oil flows reduces the probability of a complete disruption in Gulf energy exports.

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3. Treasury selloff returns as long-term funding demand remains heavy

The U.S. Treasury recently increased the size of some long-dated bond buybacks, which initially pushed yields lower.

However, the impact lasted only about one day, with the 30-year Treasury yield moving back above 5.2%.

U.S. government debt has now surpassed $40tn, and investors remain concerned about future Treasury supply and fiscal deficits.

Another emerging issue is AI infrastructure.

Large technology companies and AI infrastructure providers need enormous amounts of long-term funding for data centres, power infrastructure and GPUs.

That means AI projects are increasingly competing with the U.S. government for the same pool of long-duration capital.

Higher oil prices are also reinforcing long-term inflation concerns, making it harder for long-term yields to fall even when short-term economic data softens.

Market impact: Long-term Treasury yields near 5% remain one of the biggest valuation headwinds for growth and AI-related equities.

Positive counter: Higher yields are also becoming increasingly attractive to pensions, insurers and long-term investors, while the Treasury has signalled that additional market-support tools remain available.

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4. AI funding continues to expand — and so does real demand

Broadcom is reportedly seeking more than $60bn in debt financing to support AI chip and infrastructure projects for customers including Anthropic.

The broader financing package could potentially become much larger once senior secured debt and other funding structures are included.

This highlights an important shift in the AI investment cycle: expansion is increasingly being financed through a combination of corporate debt, private credit and special-purpose structures rather than only through hyperscaler balance sheets.

Demand, however, remains strong.

Meta has reportedly become one of Microsoft’s largest AI customers, spending hundreds of millions of dollars annually on Azure AI capacity despite already operating its own large-scale infrastructure.

Micron has also announced plans to invest another $10bn over the next decade in U.S. AI memory R&D.

Market impact: The growing use of debt increases concerns around circular financing and leverage. If AI customers fail to monetise their investments quickly enough, infrastructure orders could eventually be delayed or reduced.

Positive counter: Meta’s Azure spending, Anthropic’s infrastructure expansion and Micron’s investment all suggest that underlying AI demand remains very strong.

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Today’s focus

Markets will continue watching U.S. Treasury yields and oil prices closely.

Key U.S. data includes preliminary S&P Global Manufacturing, Services and Composite PMIs.

The next major AI catalyst is Nvidia’s earnings next week, while Jackson Hole will also be closely watched for signals on the Fed’s policy outlook.

Overall takeaway:

The AI bull case remains supported by strong demand and improving monetisation, but the market is increasingly asking a different question: not whether AI demand exists, but whether the industry can finance this expansion without putting too much pressure on cash flow, leverage and long-term interest rates.