Mike Nicoletti, Hunt Lawrence, and Jason Wallace walk this week’s Cash Flow Memo: oil stuck in triple digits, a 10-year Treasury headed toward 6%, SpaceX’s $40 billion Nvidia build, the agent threat to Apple’s App Store, and what a trillion-dollar valuation buys at Eli Lilly.
The Cashflow Memo
Key Takeaways
* SpaceX is borrowing $40 billion with Nvidia credit support for what is close to a turnkey rack build, and Mike puts SpaceX’s Nvidia spend at $180 to $280 billion next calendar year against a Street number near $400 billion for Nvidia’s fiscal 2027, so one customer could equal half of the prior year’s revenue.
* Brent sits at $100 and WTI in the low $90s with Hunt calling the Iran standoff an indefinite stalemate, and the 12-month backwardation has narrowed from about $20 to $10 to $12 as the 2027 strip rises; natural gas is holding in the $3s despite Permian associated gas driving two-thirds of the supply increase.
* Hunt expects the $1.55 trillion deficit shown in Exhibit A to land closer to $1.9 to $2 trillion and, with the 10-year Treasury at 5.5%, predicts 6% by the first half of December, a direct hit to mortgage rates and to Lennar, Home Depot, and Lowe’s.
* Jason’s Apple bear case is that Meta’s Muse agent moves transactions off Apple hardware: a two-core cloud instance lists at 4 cents an hour and likely costs Meta about $1 per user per month, so $7 of transaction volume at Apple’s 15% fee covers it, which threatens App Store services growth while Apple pushes into low-margin home hardware with LG.
* Lilly trades at a $1 trillion equity value on $23 billion of free cash flow (Exxon generates $50 billion, Apple $130 billion), which Jason defends on follow-on GLP-1 patents and out-of-cycle pipeline acquisitions; he expects Grail’s Galleri test to win a limited-cancer approval after a 7 to 2 advisory vote on risk-benefit and a split vote on effectiveness.
Show Notes
[00:33] Oil Exhibit C is unchanged. Brent is at $100 and WTI in the low $90s, and Hunt sees the Iran standoff as a stalemate with no end date.
[01:42] Backwardation The 2027 oil price keeps rising, cutting the 12-month backwardation from about $20 to $10 to $12. The market is pricing the stalemate as lasting.
[02:13] Gas Natural gas is holding in the $3s as new LNG trains come on, but high oil prices keep pushing associated gas out of the Permian.
[02:55] Deficit Exhibit A needs a rework, with the deficit likely closer to $2 trillion. Hunt predicts a 6% 10-year Treasury by the first half of December and flags the hit to homebuilders and home improvement retailers.
[05:42] SpaceX’s $40 Billion SpaceX is borrowing $40 billion with Nvidia credit support for a near-turnkey rack build. Mike sizes SpaceX’s Nvidia spend at $180 to $280 billion next calendar year.
[08:02] Nvidia’s Pace Why SpaceX builds on Nvidia alone: a yearly generation leap that no one else matches, plus the cooling, power, and architecture that let Colossus run 100,000 coherent GPUs.
[10:33] Apple Jason was an Apple bull for about a day. The home hardware push with LG is a low-margin bet in a crowded market, and the company needs a software leader.
[12:32] Agents vs. the App Store Meta’s Muse gives every user a cloud server for roughly $1 a month. Transactions that run there never touch Apple hardware or Apple’s 15% fee.
[17:11] Lilly at a Trillion Hunt lines up the 12 trillion-dollar tech companies against Exxon, Lilly, JP Morgan, and Walmart. Jason makes the case for Lilly’s follow-on GLP-1 patents and pipeline acquisitions.
[20:33] Grail’s FDA Vote The advisory panel split on Galleri’s effectiveness and voted 7 to 2 that the benefit outweighs the risk. Jason expects approval for a limited set of cancers.
[23:00] Hospital Price Letters The FTC sent warning letters to a couple dozen large hospital groups over price transparency rules that have gone unenforced for years.
[23:57] After the Midterms What a Democratic House and Senate would mean for the administration’s healthcare agenda, and why food supply reform and price transparency look bipartisan.
[26:44] Food Additives How the generally-recognized-as-safe system lets manufacturers self-certify new ingredients, and how a 1997 change made notifying the FDA voluntary.
Download this week’s Cash Flow Memo at telltales.us and subscribe. More Apple and more on food additives next week.
Cashtags
$AAPL $AMD $AMZN $GOOGL $GRAL $HD $ILMN $INTC $JPM $LEN $LLY $LOW $META $MU $NVDA $TSLA $VRTX $WMT $XOM
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