Alphabet is now Berkshire's Top 5 | Einhorn calls SpaceX the top

Good morning, Slaters!

The market spent Friday celebrating the fact that America shed 23,000 jobs in July.

That is the kind of sentence that reads badly if you say it out loud. Nonfarm payrolls came in at negative 23,000 against a consensus of plus 80,000. May and June were revised down by a combined 103,000. Wage growth cooled. Labor-force participation dropped to 61.4%, the lowest in more than five years. The S&P 500 closed at a fresh record of 7,757.64. The Nasdaq climbed 1.3%. Semiconductor stocks capped their best week since April.

The logic is simple and slightly grim. A weakening labor market means a Federal Reserve that keeps its hand off the rate-hike button. Odds of a September hike fell by Friday's close. Bad news, good tape.

That's the frame for this morning.

Then over the weekend, two things happened that changed what the tape is being asked to justify. Berkshire Hathaway's first full Buffett-free earnings report landed Saturday, and Greg Abel showed the world what a $40 billion cash-to-equity pivot looks like. And David Einhorn quietly went on record calling the entire moment a bubble.

Wednesday's CPI print is the referee. Let's get to it.

Alphabet just walked past Apple in Warren Buffett's living room

Berkshire Hathaway (BRK-B) posted Q2 net income of $25.67 billion on Saturday, up 107% year-over-year. Operating earnings rose 16% to $12.98 billion on strength in energy, rail, and manufacturing. Insurance underwriting was the soft spot, down 13%.

Those are the headline numbers. The real story is inside the equity book.

Alphabet (GOOG) is now a top-five holding. Buffett said in an interview that missing Google early was one of his biggest mistakes, and confirmed the Alphabet trade was his call, not Abel's.

The bigger picture is what Greg Abel did with the cash pile. Berkshire was a net buyer of equities for the first time in fourteen quarters. Buybacks jumped to $4.5 billion. First-half equity purchases totaled roughly $40 billion, up from $7 billion in the same period last year. The cash reserve fell to $365.5 billion, its first quarterly decline in four years. Add the H1 acquisitions of OxyChem and Taylor Morrison ($16 billion combined) and the picture sharpens. Abel is deploying deliberately into a market Buffett publicly said was too expensive to touch.

The market signal?

The "cash on the sidelines" narrative just lost its most-watched participant. If Abel is a buyer here at S&P 7,757, any AI-infrastructure name Berkshire touches next reprices on the announcement day, and the perma-bear thesis that valuations must correct before deployment resumes has a hole in it.

The record that a job loss built

Friday's jobs number was the most consequential print of the summer, and the market's read of it was almost optimistic.

The S&P 500 closed at 7,757, up 0.62%, for a record. The Nasdaq added 1.3% to 26,690. The Dow rose 152 points to 54,036. The VIX sat at 16.50, low-volatility complacency territory. The 10-year yield eased to 4.64%. WTI settled at $75. Gold pushed to roughly $4,128, a seven-week high. Semis led the week, with the iShares Semiconductor ETF (SOXX) up over 7%. Software joined in: Atlassian (TEAM) surged 32%, Doximity (DOCS) rocketed 81%, and The Trade Desk (TTD) fell 21% on a rare double miss.

The setup for this week is unambiguous. July CPI drops Wednesday at 8:30 AM ET. Consensus is 2.8% to 3.0% headline and core near 3.1%. A hot number breaks the Friday narrative in two: a softening labor market into stubborn inflation is the definition of stagflation, and the Fed cannot cut into it. A cool number gives the tape a second leg.

The market signal?

The tape has priced in a benign CPI. Anything at or below consensus on core keeps the melt-up going. A core print at 3.2% or higher and the rally that a job loss built starts looking like the wrong trade in the wrong week.

David Einhorn just called the top on SpaceX

Greenlight Capital's David Einhorn, the hedge fund manager who shorted Lehman Brothers before its 2008 collapse, sent his quarterly letter Thursday. The subject was SpaceX (SPCX).

Einhorn described the $1.75 trillion IPO as a possible marker for a speculative peak in equities. He questioned the valuation on cash-flow and revenue metrics. He questioned the investment-grade credit rating on a company that burns cash. And he questioned whether even a probability-weighted future revenue scenario could support the current market cap.

The quote that traveled: "As for the $1.75 trillion IPO valuation, we don't know whether to describe it as the meme-ification of markets at scale, the latest evidence of market failure, the astonishing manipulation of the IPO process, or yet another humiliation for value investing."

Four framings, all uncharitable. Einhorn is writing to be on record before whatever comes next.

The context matters. SpaceX briefly touched a $3 trillion valuation after its June debut before pulling back. It reported Q2 revenue up 92% year-over-year in its first public earnings. The 911.5 million-share lockup released last week and the stock held, with retail buying absorbing a chunk of the initial selling. Einhorn's read is not that SpaceX is a bad business, but that no business justifies 87 times sales, more than twice Nvidia's (NVDA) 2023 AI-peak multiple. He argues the market is paying for Starship, xAI, and orbital data centers that have no near-term revenue.

The market signal?

Einhorn joins Michael Burry as the second high-profile investor to publicly flag SpaceX's valuation as a signpost, not a fundamental. When the Lehman short and the housing short both say the top is near, it doesn't mean the top is here. It means position sizing on high-multiple names becomes the trade of Q3.

Trump quietly downgraded the Iran deal from "close" to "semi"

Markets ended last week convinced a Strait of Hormuz deal was nearly done. Treasury Secretary Scott Bessent had suggested imminence on CNBC. Oil was pricing it. Airline and shipping stocks were pricing it.

Then Sunday happened. President Trump told Axios that Washington is "low keying it" and "only semi-negotiating" with Tehran because he wants Iran to feel more economic pressure. Iran's foreign minister said there are no direct talks at all, only messages through intermediaries. The tone shift is being read as a walkback, not a breakdown, but the market is repricing accordingly. S&P 500 futures slipped about 0.2% overnight. Nasdaq futures held flat. Dow futures fell 0.3%.

There is a pattern worth naming. Since April, Trump has dozens of times suggested a deal is close. Oil has fallen on each suggestion. Stocks have rallied on each suggestion. And no deal has materialized.

Helima Croft at RBC Capital Markets put it plainly: there is a tremendous optimism bias in the market. Every rally on a Trump statement compresses the return available when a deal actually lands. And every walkback opens the door slightly wider to a spike if talks break decisively.

The market signal?

The Iran trade is now asymmetric in the wrong direction. Oil has priced in a deal that hasn't been signed. Downside from a fresh escalation is much larger than upside from a signing. Watch Brent inventories at the terminals in Fujairah and Sohar for the ground truth. The tanker data is not political.

Half the internet is no longer for people

Cloudflare (NET) reported Thursday. The stock hit a record on Friday, closing up around 8%. Revenue rose 36% to $696.1 million, guidance was raised, and net dollar retention hit 120%.

None of that is the interesting number.

CEO Matthew Prince said on the earnings call that for the first time in Q2, more than 50% of traffic across Cloudflare's network was not human. Bots, crawlers, and AI agents crossed the majority in May. Prince's earlier estimate had put the crossover in 2027. CFO Thomas Seifert then extended the forecast: if current trends continue, non-human traffic will be roughly 1,000 times human traffic within five years. Humans, in his phrase, will be "a rounding error on the internet."

The advertising model that has funded the consumer internet for 25 years assumes humans are on the other side of the request. A world where AI agents do most of the browsing before a human ever sees anything breaks that assumption. Cloudflare is building payment rails for machine-to-machine transactions and per-crawl licensing for AI companies. Meta (META) and Alphabet, whose ad businesses total roughly $500 billion combined, are the incumbents facing the shift.

The market signal?

The advertising incumbents are pricing an internet where humans still browse. The infrastructure names are pricing an internet where they don't. As those prices diverge, capital rotates toward the plumbing and away from the pageview.

• July CPI drops Wednesday at 8:30 AM ET. It is the single most consequential number of the month, and after Friday's jobs miss, the odds of a September rate hike sit at 44%. A hot core reading pushes those odds sharply higher and closes the ceasefire trade at the same time. A cool one gives the S&P a runway to 7,900. Consensus is 2.9% headline, 3.1% core.
• Simon Property Group (SPG) and Plug Power (PLUG) report after today's close. Simon's Q2 FFO consensus is $3.21 on revenue of $1.61 billion. The stock is up almost 20% year-to-date and above the average analyst target, which means today's guide has to justify the premium. Watch net operating income growth. Q1 printed 6.7%. Anything under 6% resets the story.
• Cisco Systems (CSCO) and Tencent (TCEHY) both report Wednesday, which is also CPI day. Cisco is the read-across on enterprise AI networking demand after HPE (HPE) and Dell (DELL) reset the bar earlier this earnings cycle. Tencent is the read-across on Chinese consumer, mobile gaming, and cloud in a week when the US-China tape has quietly heated back up.
• The market signal across all three? Wednesday morning is the busiest three-hour window of Q3. Get positioned before it, not during it.

That's it for today's Slate.

Big week. Simon Property tonight, CPI Wednesday, Cisco and Tencent right behind it. Stay close to the feed.

Today's reply prompt: If CPI prints hot on Wednesday, what's the one sector you'd sell first?