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The Chart Room: Less Capex?
OPTIONS WITH HANS · CHART ROOM
Agents Don’t Look at Ads.
Wednesday, October 28, 2026 · Charts through today's close
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Note From Hans
The Fed held rates steady today in a 10–2 vote, and both dissenters wanted a hike, so a December hike is still on the table. Stocks barely cared. The S&P rose 0.28% to 7,743.98 and the Nasdaq 100 gained 0.5%. Chips followed through again after SK Hynix’s record quarter (SK Hynix +13%, Micron +6%, Sandisk +7.7%), Vertiv jumped 16% and Oracle 10.7%. The 10-year rose to 5.045%, oil climbed back above $101 and the VIX fell to 16.91. Breadth was thin again: 54% of S&P stocks fell.
The real news came after the bell. Alphabet’s Search revenue grew 12% in the third quarter. The Street wanted 15%. That’s down from 19% in the first quarter and 17% in the second, and the company warned the December quarter faces a tougher comparison. The stock dropped as much as 10% after hours, to around $290 from a 324.89 close. Microsoft went the other way, up about 4% after hours to around $552.
This is why I haven’t really owned Google since 375. Few moats are bulletproof, and it looks like search growth is finally slowing. Alphabet blamed currency, an EU rule change and the fade of a World Cup boost in the second quarter. But it also said growing use of AI Mode is weighing on revenue, because AI Mode doesn’t make as much money per search yet. And agentic AI is only starting. That’s not positive for search, or for ads in general. Agents don’t look at ads.
Yesterday I said the bounce was real but the AI buildout is running into money and equipment walls. Tonight added a third problem: some of the businesses that are supposed to pay for all that spending are changing under their owners’ feet. Alphabet didn’t cut its spending plans. It said capex will rise significantly again next year. More spending, slower search. I’m still careful.
THE BIG PICTURE
Search Went From 19% to 12% in Two Quarters
Google Search & other advertising revenue growth, year over year. Source: Alphabet quarterly results.
Alphabet’s Search business grew 19% in the first quarter, 17% in the second and 12% in the third, against 15% expected. The rest of the report was fine. Revenue was $127.6 billion, up 25%, and Google Cloud more than doubled to $30.7 billion. Earnings missed largely because of an $8.2 billion paper loss on its SpaceX stake.
Search is the business that pays for everything else, and two things are pulling on it. First, AI Mode answers the question instead of handing you ten blue links and a row of ads, and it doesn’t make as much money per search yet. Alphabet says it’s working on that. Second, the next wave is AI agents that shop, book and compare for you, and Alphabet is building them too. An agent doesn’t scroll past a sponsored link. It goes and gets the answer.
Hans’s take: Search was the best toll booth on the internet for 20 years. Agentic AI is building a road around it. Alphabet has the assets to adapt, but the transition costs money, and the market just started pricing that. The stock is already below its 200-day. I’d rather sell premium on it than own it.
EARNINGS
Microsoft Is Knocking on 550
Microsoft closed at 531.01 (−0.06%), then rose about 4% after hours to around $552. That’s right at the October high (551.15) and the heavy supply around 550. The 50-day is 511.16.
Hans’s take: Microsoft sells software and cloud to businesses. It doesn’t depend on ad clicks. That’s why the two reports went in opposite directions. A close above 551 would be a breakout above the October high.
ADS
Meta Is the Other Ad Giant
Meta fell 7.70 (−1.24%) to 612.49, its third straight close below its 200-day (631.29) and below its lower Bollinger Band (613.15). It’s 21% below its September high (779.82). The demand zone near 560 to 590 is next.
Hans’s take: Meta is the other company that lives on ads, and it just raised tens of billions of dollars in new stock to fund AI. If agents don’t look at ads, that’s a question for Meta too. I’m in deep enough on Meta and will look to harvest some calls on a bounce.
EARNINGS
Amazon Reports Tomorrow Night
Amazon rose 1.50 (+0.59%) to 254.60, sitting on its 20-day (255.17) and 50-day (255.12) with the 200-day (243.38) below. The top of its range runs through the 265 area. It reports tomorrow after the close, with options pricing about a 7.8% move.
Hans’s take: Amazon has its own ad business, and it’s also listing products from rival sites for AI shopping agents. That tells you where Amazon thinks shopping is going. 7.8% is about $20 either way.
SEMIS
Chips Are Back at the 50-Day
SMH rose 9.69 (+1.74%) to 567.67, up about 9% from last Thursday’s low (520.53). It closed just under its 50-day (573.40) and 20-day (578.11) after tagging 571.00. SK Hynix rose 13% after record results and said memory supply stays tight.
Hans’s take: Memory demand is the one part of the AI story nobody is arguing with. But 573 to 578 is real resistance, and Intel and Sandisk report tomorrow night. Strength here is for selling premium, not chasing.
MEMORY
Sandisk Jumped 7.7% Into Its Report
Sandisk rose 99.93 (+7.66%) to 1,404.77, its best day since the selloff started. Last week’s low (1,228.89) held right at the rising 200-day (now 1,250.65). The 20-day is 1,470.10 and the 50-day 1,571.68. It reports tomorrow after the close, with options pricing about a 9% move.
Hans’s take: Memory is a bottleneck, and the SK Hynix numbers just said so again. But a 14% bounce off the low into a 9% expected move is a lot of good news priced in. That’s premium worth selling.
CLOUD
Oracle Broke Out of Its Wedge
Oracle jumped 14.01 (+10.73%) to 144.54 on 81 million shares, after laying out long-term targets and its financing plans. It broke out of the falling wedge from the 170.07 September high and closed above its 50-day (141.72). The upper Bollinger Band is 148.26 and the 200-day 156.53.
Hans’s take: The market was worried about how Oracle pays for its buildout. Some clarity on financing was enough for a 10% day. That tells you how much the money question matters right now.
RATES
The 10-Year Is Back Above 5%
$TNX rose 0.52 to 50.45 (5.045%), back above its 50-day (50.02) and the 50 line. The 20-day is 51.52, and the October peak was 5.364%.
Hans’s take: Yields rose with oil into the Fed and finished near the highs of the day. Two Fed officials voted for a hike. Every dollar of AI capex is still being financed at 5%.
Still in the full Chart Room: five more charts, including the S&P back above its 20-day, QQQ on its 50-day, Amrize, oil and the VIX, plus Tomorrow and Friday and The Through Line.
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Charts are end-of-day through Wednesday, October 28, 2026. Market data sourced from StockCharts.
This material is for educational and informational purposes only and is not a recommendation to buy or sell any security. Options carry risk and are not suitable for every investor.
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