What you Need to Know for July 31

What the fall of Situational Awareness means for the markets

Author

HY Harry
July 31, 2026

Welcome back. A couple big things to lead with - the Fed and the collapse of Situational Awareness.

The Fed doesn’t want to play the ball: The Fed held rates at 3.5%-3.75% by a 9-3 vote, citing solid growth but inflation still above its 2% target. Tbh, we’re not fans of the way Kevin Warsh conducts himself in these conferences. He’s stumbling around and speaking a lot of corporate word salad. More notably though, he’s marketed himself as someone tough on inflation, yet didn’t hike 25bps. That’s why rates went higher after the conference ended. President Trump wasn’t critical of the Fed holding rates on Wednesday though, not blaming Kevin at all (relative to Powell) and saying the “political board” is the problem. We think this shows that Warsh might get a pass if the committee overrules him on any rate decisions. We’ll give Warsh the benefit of the doubt this month, but for September, we expect a 25bps rate hike from someone who says they’re serious about price stability and firm about the 2% number.

Leopold flies too close to the sun: Yesterday was remarkably one of the craziest days in the market in some time. Citadel bought the leveraged portion of Situational Awareness's stock portfolio after the Leopold Aschenbrenner led hedge fund faced margin calls from deep losses on highly levered, high-beta AI-bottleneck plays. Ken Griffin and Citadel buying this portfolio and immediately recouping a big gain (Nebius and Bloom were up 27% yesterday for example) was a brutal masterclass from one of the hedge fund industry’s sharpest minds.

Notably too, it seems like there was margin call pressure last week, and an increase in short interest from Wall Street earlier this week knowing that Leopold was overlevered and facing pressure from his primes. This rundown from Martin Shkreli describes this dynamic and the price action in several of these AI names perfectly.

With it becoming clearer that the recent price action in AI was because of the Leopold unwind, as opposed to a dramatic derisking due to fundamental reasons, this gives us an indication that the market is recovering from here; albeit some of these Leopold levered-beta trades might not be the focal point of the AI story anymore. The Chinese models and Anthropic/OpenAI IPO status debates can come another day, for now we can breathe a bit knowing this week’s selloff was more technical than fundamental.

On that note….we’ve been toying with a new content idea where every edition of WSR we crown a “MVP” of which financier or business leader is today’s big winner. Without further ado, we have today’s big winner:

July 31st’s Wall Street Rollup Most Valuable Player 👑 

Ken Griffin, CEO of Citadel

Ken Griffin has won been awarded the inaugural WSR MVP award for today after scooping up Leopold Aschenbrenner’s AI portfolio on the cheap.

Email us to nominate August 2nd’s WSR MVP.

Let’s get into it.

Today’s Jobs:

  1. Apollo is hiring a Principal within Global Corporate Credit to cover Retail, Autos & Mobility (NY)

  2. Ares is hiring a Direct Lending Associate (NY)

  3. Blackstone is hiring its Global Head of Corporate Real Estate Performance & Strategy (NY)

  4. PPMA is hiring a Corporate Credit Research AVP (Chicago)

  5. Invesco is hiring a CLO Analyst (London)

Earnings Corner 💸 

  • Microsoft $MSFT ( ▲ 15.51% ) revenue beat at $90.0B vs. $87.7B, while EPS beat at $4.74 vs. $4.25. Results were driven by 43% Azure growth, accelerating enterprise AI adoption, Microsoft 365 Copilot surpassing 30 million paid seats, and record Intelligent Cloud revenue of $39.3B, as customers continued shifting workloads to Azure and purchasing more AI services, driving both higher cloud consumption and software monetization. Remaining performance obligations climbed to a record $678B, reflecting strong long-term customer commitments, while capital spending of $41B came in below expectations despite continued AI infrastructure expansion, easing concerns that AI spending was outpacing returns. Mgmt guided above expectations, forecasting Azure growth to accelerate to 45% next quarter as AI demand continues to outpace available capacity.

  • Meta $META ( ▼ 7.95% ) revenue beat at $60.8B vs. $60.2B, while EPS missed at $6.18 vs. $7.14. Results were driven by 28% advertising revenue growth, higher ad pricing, and continued user growth across its Family of Apps, but earnings were weighed down by a $2.4B legal charge related primarily to youth safety litigation, a $1.2B severance charge tied to its May workforce reduction, and higher AI infrastructure spending, causing FCF to fall 91% y/y to $784M. Mgmt. raised FY26 capital expenditure guidance to $130B–$145B (vs $125B-$145B), guided Q3 revenue of $61B–$64B slightly below expectations, and did not provide a 2027 capital expenditure outlook.

  • Apple $AAPL ( ▼ 1.41% ) revenue beat at $109.42B vs. $109.04B, while EPS beat at $2.02 vs. $1.89. Results were driven by 22% iPhone growth, 29% Mac growth, 12% Services growth, and record June qtr. revenue across every geographic segment, as stronger than expected demand for iPhones and Macs offset foreign exchange headwinds. Earnings also benefited from an $0.11/share tariff refund. Mgmt guided Q4 revenue growth of 9%–11%, below expectations, citing worsening supply constraints for iPhone, Mac, and iPad production due to shortages in advanced chip manufacturing capacity and rising memory costs. Apple also said it is evaluating additional memory suppliers after reluctantly raising Mac and iPad prices to offset higher component costs. Shares are down -6% after hours.

  • Amazon $AMZN ( ▲ 3.91% ) revenue beat at $200.61B vs. $196.47B, while EPS beat at $5.75 vs. $1.82. Results were driven by strong enterprise AI demand that accelerated AWS growth to its fastest pace in 18 quarters, continued advertising momentum, higher North America retail sales fueled by Prime Day, and growing adoption of Amazon's AI chips and Bedrock platform. Mgmt raised 2026 capex to $220B from $200B due to higher memory costs and continued AI infrastructure investment, saying demand continues to outpace available capacity through 2027 with AWS backlog reaching $496B. Mgmt guided Q3 revenue of $197B–$202B, below expectations after shifting this year's Prime Day into Q2, while noting underlying growth would have been nearly 400 bps higher excluding the calendar shift. Shares are up 9.5% after hours.

  • Starbucks $SBUX ( ▲ 1.64% ) revenue beat at $9.32B vs. $9.16B, while EPS beat at $0.85 vs. $0.66. Results were driven by 7.9% global comparable sales growth, an 8.1% increase in North American same store sales, higher customer transactions and average ticket sizes, menu innovation, and continued progress under CEO Brian Niccol's "Back to Starbucks" turnaround, including café renovations and service improvements that helped bring customers back. Revenue declined 1% due to the sale of a controlling stake in its China business, while tariff refunds helped support margins. Mgmt raised its FY EPS and comparable sales outlook, reached its goal of renovating 1,000 North American stores ahead of schedule, and accelerated plans for additional store upgrades.

  • KKR $KKR ( ▲ 1.71% ) revenue and EPS beat. Results were driven by record asset sales that generated the firm's largest monetization qtr. in its history, a 26% increase in mgmt fees, record fee-related earnings, $34B of quarterly fundraising ($133B TTM), and 16% AUM growth to $796.5B. Mgmt highlighted a strong monetization pipeline despite a slower private equity exit environment and said AI infrastructure, credit, and power investments remain key growth opportunities.

  • General Dynamics $GD ( ▲ 0.33% ) revenue and EPS beat. Results were driven by strong Aerospace and Marine Systems performance, as higher Gulfstream jet deliveries and aftermarket service revenue, improved shipyard productivity, and a stabilizing supply chain boosted revenue and expanded operating margins. Orders of nearly $20B lifted backlog to a record $136.5B, while first-half FCF reached $3.6B with cash conversion above 150%. Mgmt raised FY26 guidance to $16.80–$16.90 in EPS and approximately $55.7B in revenue, citing continued strong demand across its defense businesses.

  • Robinhood $HOOD ( ▼ 3.61% ) top and bottom line beat as results were driven by surging prediction markets activity fueled by the World Cup, with event-contract revenue climbing to $156M to become the company's second-largest trading business, alongside continued strength in options and equities trading, higher net interest income, and record Gold subscriptions. Prediction market growth also benefited from routing more contracts through its in-house Rothera exchange, improving economics and helping attract more customers to the platform. Mgmt lowered FY26 expense guidance and said prediction markets remain its fastest-growing business, with July trading activity staying near Q2 record levels.

  • Chipotle $CMG ( ▲ 12.5% ) revenue beat at $3.35B and EPS slightly beat at $0.33. Results were driven by returning customer traffic, successful menu innovation led by Chipotle Honey Chicken and its new cilantro lime sauce, stronger engagement through Chipotle Rewards, and an improved value proposition that helped attract younger and lower income diners. Mgmt raised its FY26 same store sales outlook from flat to low single digit growth. Concerns over the U.S. cyclospora outbreak weighed on July sales by roughly 2 percentage points, although Mgmt said its supply chain was unaffected and maintained its outlook.

  • Wingstop $WING ( ▼ 3.66% ) revenue missed at $185.6M vs. $190.1M, while EPS beat at $1.18 vs. $1.02. Results were driven by weaker spending from lower income consumers, as inflation and economic uncertainty weighed on traffic, leading to a 7.5% decline in domestic SSS. Mgmt is responding with more value-focused promotions and its new Club Wingstop loyalty program, while lowering its FY26 domestic same-store sales outlook but maintained global unit growth outlook.

  • Ferrari $RACE ( ▲ 3.12% ) top and bottom line beat as results were driven by continued demand for higher margin personalization options, deliveries of the F80 supercar, and resilient demand that kept its order book full through 2027 despite lower vehicle shipments. Mgmt raised FY26 revenue, earnings, and free cash flow guidance, citing a sustained personalization trend and continued healthy demand, while saying interest in its first EV remains strong.

  • Cigna $CI ( ▼ 2.97% ) revenue and EPS beat as results were driven by strong growth across its Evernorth pharmacy services and Cigna Healthcare businesses, fueled by higher specialty drug volumes, faster adoption of biosimilars and specialty generics, and continued strength in its U.S. employer health plans. Mgmt raised its FY26 adjusted EPS guidance to at least $30.45, but shares fell as investors focused on slower GLP-1 growth, continued investments weighing on its Pharmacy Benefit Services business, and a guidance increase that largely matched expectations.

  • Coinbase $COIN ( ▲ 2.18% ) revenue and EPS missed as weaker crypto trading activity, lower stablecoin revenue, and softer subscription revenue weighed on results. Lower interest rates reduced stablecoin income, while an unrealized loss on its crypto investment portfolio further pressured earnings. Despite gaining a record 10.3% share of crypto trading, shares fell as slowing industry activity, weaker monetization, and continued reliance on trading revenue overshadowed market share gains.

  • Roblox $RBLX ( ▼ 2.91% ) revenue missed while EPS beat as bookings, daily active users, and hours engaged all came in below expectations, signaling softer player engagement. Mgmt guided for slower revenue growth and a decline in Q3 bookings, while withdrawing its FY outlook.

  • Reddit $RDDT ( ▲ 0.03% ) revenue and EPS beat as strong advertising demand, international expansion, improved ad targeting, and continued user growth drove 61% revenue growth. Mgmt said Google search referrals became "choppy" during the quarter, overshadowing strong results and raising concerns that AI-powered search could reduce traffic and make future user growth more volatile.

  • Rivian $RIVN ( ▲ 3.06% ) revenue and EPS beat. Results were driven by higher vehicle deliveries, increased regulatory credit revenue, strong growth in its software and services business, and the first deliveries of its R2 SUV, helping the company post another quarter of positive gross profit. Mgmt lowered its 2026 capital spending plans, narrowed its EBITDA loss guidance, reaffirmed its delivery outlook, and said R2 demand and customer conversion rates have exceeded internal expectations.

  • Live Nation $LYV ( ▼ 0.47% ) revenue beat at $7.67B, while EPS beat at $1.05. Results were driven by record concert attendance, continued international expansion, stronger Ticketmaster profitability, and resilient consumer spending, with record deferred revenue providing strong visibility into the second half of the year. Mgmt reaffirmed it expects double digit fan revenue growth, and adjusted operating income growth in 2026, citing record ticket sales, low cancellation rates, and no signs of slowing demand for live events.

  • Yum! Brands $YUM ( ▲ 3.34% ) revenue missed at $2.17B vs. $2.20B while EPS beat at $1.62. Results were driven by new new restaurant openings, 7% same store sales growth at Taco Bell before the Cyclospora outbreak, and continued strength at KFC, although Pizza Hut remained a drag. The Cyclospora outbreak linked to Taco Bell pushed U.S. same store sales down 2% in July after a sharp decline in traffic, but Mgmt said sales have steadily recovered, consumer sentiment has returned to pre-outbreak levels.

On The Move 📈 📉

IPO Roundup 📍 

  • Jersey Mike’s Subs Inc. $JMKE ( ▼ 5.96% ) slumped in its NYSE debut Thursday after raising $1B in an IPO priced at $23 (midpoint of the $21-$25 range). The Blackstone-backed sandwich chain came in at a $6.87B valuation, below the ~$8B top-of-range target and well below the ~$12B initial estimate. Morgan Stanley, Jefferies, and JPMorgan led the offering.

  • Sustainable womenswear brand Reformation began trading on the NYSE Thursday, closing flat after raising $210.9M in an IPO priced at the bottom of its $15-$17 range. The Permira-backed company sold 9.48M shares alongside 4.58M from selling backers for an ~$890.9M market value. JPMorgan and Morgan Stanley led the offering.

  • Braveheart Bio Inc. is targeting up to $318.8M in its IPO, pricing 18.8M shares at $15-$17 for up to a $1.2B valuation. The A16z-backed clinical-stage biotech, chaired by Biogen CEO Christopher Viehbacher, is developing lead drug BHB-1893 to treat hypertrophic cardiomyopathy. Goldman Sachs, Jefferies, TD Bank, Stifel, and Cantor Fitzgerald are leading the offering.

Attention Credit Professionals - This is for you all:

We've partnered with Constellation, the AI-native credit platform built by ex-Goldman SSG and JP Morgan operators, backed by Haystack, Company Ventures, and Cooley LLP, and being shaped, in real time, by the analysts, advisors and restructuring lawyers using it.

Constellation parses 300-page indentures and credit agreements into structured data in minutes - extracting every covenant, calculating capacity, and flagging LME vulnerabilities that would take associates hours or days to surface - that data flows directly into your Claude surface to supercharge your analysis and workflows.

But the platform is still being built. Which means design partners aren't buying a finished product, they're defining what canonical credit infrastructure looks like for the next decade.

The most competitive credit funds, restructuring advisors, and Am Law firms are already at the table.

Today’s Headlines 📖🍿 

  • US GDP grew 1.5% in Q2, below the 1.8% forecast and down from 2.1% in Q1, the miss driven by declining inventories and federal spending rather than weak underlying demand. Personal spending rose 2.1% and final sales to private domestic purchasers jumped 3.9%. June core PCE inflation held at 3.3% annually, in line with forecasts but still well above the Fed's 2% target, a day after the Fed voted 9-3 to hold rates at 3.5%-3.75%.

  • Satya reveals AI ROIC, sharing on X that he built an ROIC intelligence app that claims ROIC on hyperscaler capex is 29.7%; providing a datapoint to investors who have questioned dramatic AI spend.

  • Blue Owl says private credit redemption pressures are easing though fundraising fell to a three-year low. The firm raised $7.6B in Q2, down from $12.1B a year earlier, and private wealth inflows dropped to $1.7B from $4.4B. Total AUM rose 12% to $319B, and CFO Alan Kirshenbaum said inflows from wealthy clients have “troughed” as direct lending now represents 35% of assets, down from ~50% two years ago.

  • Morgan Stanley-led banks are arranging $15B in debt for an Anthropic data-center project in Hubbard, Texas. The package for developer Nexus Data Centers, backed by Google, covers a $14B bridge loan and a revolving credit facility. Google will take a ~20% equity stake and cover billions in lease and power obligations if Anthropic defaults.

  • Goldman Sachs is gauging investor appetite for a $5.4B debt offering to help fund a Blackstone-backed QTS data center leased to Microsoft. The deal would include ~$4.9B of secured bonds (5-year maturity) and a ~$500M term loan (7-year). Timing is uncertain after a selloff in AI-tied debt: BlackRock recently faced weak demand for a $12.5B Meta bond, and CoreWeave was forced to sweeten terms on a $2.6B loan for AI computing capacity.

  • Blue Owl’s data center firm Stack Infrastructure is seeking an A$8.5B ($5.9B) syndicated loan to fund its third Melbourne data center, potentially one of the largest such financings in Australia. Talks with banks are at an early stage, and the deal follows another multibillion loan for Blackstone’s AirTrunk in Sydney.

  • Xerox sold $105M of tariff refund receivables to a third party for $80M in cash, using the proceeds to repurchase discounted debt as it works through $4.2Bn of total debt, which includes $556M of unsecured notes due August 2028 trading at 60 cents on the dollar.

  • Thoma Bravo’s Proofpoint reworked a $5B loan refinancing to win over anxious lenders, adding protections against asset-stripping maneuvers and agreeing to make future debt buybacks public. The deal extends $4.3B of the loan by two years at S+450, vs S+300 previously.

  • Coreweave’s $2.6B leveraged loan deal ends up at S+550 instead of initial price talk of S+425-450, receiving $9B of commitments following lender-friendly changes to the offering.

  • Insurance companies Delaware Life and Clear Spring Life, both controlled by Dodgers owner Mark Walter’s TWG Global, are under parallel SEC and DOJ investigations over billions in related-party loans to Walter-affiliated companies. Two insurers revised their disclosed affiliated investments from an original $1B estimate up to $16B.

  • UEFA threatened to boycott all FIFA competitions, including the World Cup, unless FIFA scraps its plan to sell a 20% stake in a new commercial entity, FIFA Forward Enterprise, to private investors for $4.2Bn. The proposal has drawn added scrutiny since Thrive Eternal, a firm founded by Joshua Kushner, is expected to lead the investor group.

  • Capital is moving towards sports teams: With capital moving towards AI, there’s a rotation out of commoditized industries into companies with staying power and cultural relevance. Read more on it here.

  • Want to read up on a distressed debt case study about a failed EDM rollup? Read the HYH Credit Research team’s latest writeup here.

M&A Transactions💭 

WaterFleet, provider of mobile water, wastewater utility services, and workforce relief remedies, has reached a definitive agreement to be acquired for $200.0M by Xylem (NYS: XYL).

Sanara MedTech (NAS: SMTI), a medical technology company, has reached a definitive agreement to be acquired for $369.144M by Mimedx Group (NAS: MDXG). The payment consideration includes $33.00 in cash and 0.4735 shares of Mimedx common stock for each share of the company’s common stock it owns. EV/EBITDA was 42.22x and EV/Revenue was 3.43x. Truist Securities advised on the sale.

Quantios, developer of business-critical financial services software, has entered into a definitive agreement to be acquired for GBP 400.0M by Vista Equity Partners. Deutsche Bank and Robert W. Baird & Co. advised on the sale.

Maruyama Chiller, manufacturer of industrial chillers, has reached a definitive agreement to be acquired for JPY 26.46B by Komori (TKS: 6349).

Macquarie Airfinance, operator of a diversified aircraft leasing company, was acquired for $9.0B by Dubai Aerospace Enterprise. J.P. Morgan advised on the sale.

The Rig Owning Entities of Fontis Finance, a subsidiary of Paratus Energy Services (OSL: PLSV), was acquired by BC Ventures for $287.0M.

The Jack Up Business of Paratus Energy Services (OSL: PLSV) was acquired by Grupo CME for $400.0M.

ES&H, provider of environmental services, has reached a definitive agreement to be acquired for $305.0M by Clean Harbors (NYS: CLH).

DroneDeploy, developer of a drone data platform, has reached a definitive agreement to be acquired for $845.0M by Procore Technologies (NYS: PCOR). Citibank advised on the sale.

CBIZ (NYS: CBZ), provides professional services advisors to middle-market businesses and organizations nationwide, has entered into a definitive agreement to be acquired for $2.99B by Grant Thornton. EV/EBITDA was 8.17x and EV/Revenue was 1.08x. Goldman Sachs advised on the sale.

MarketAxess Holdings (NAS: MKTX), a leading electronic fixed-income trading platform, has reached a definitive agreement to be acquired for $5.7B by Intercontinental Exchange (NYS: ICE). EV/EBITDA was 13.24x and EV/Revenue was 6.55x. J.P. Morgan advised on the sale.

FireFly Bio, operator of an antibody-drug conjugate-based healthcare platform, was acquired for $1.0B by Johnson & Johnson (NYS: JNJ). Centerview Partners advised on the sale.

Anthem Entertainment, operator of a music production and publishing division, has entered into a definitive agreement to be acquired for $600.0M by Influencer Media Partners and BlackRock. Goldman Sachs advised on the sale.

Permiso, developer of a cloud security software, has reached a definitive agreement to be acquired for $200.0M by Okta.

Novartis India (BOM: 500672), an India-based pharmaceutical company, was acquired for INR 14.46B by ChrysCapital. EV/EBITDA was 14.08x and EV/Revenue was 5.22x. Kotak Investment Banking advised on the sale.

Depop, operator of a mobile marketplace, was acquired for $1.4B by eBay (NAS: EBAY).

Anyscale, developer of a distribution computing platform, has reached a definitive agreement to be acquired for $1.65B by Nscale. Qatalyst Partners advised on the sale.

Private Placement Transactions💭 

ThreatLocker, developer of a cybersecurity platform, raised $190.0M of Series F venture funding led by Elephant Partners.

Onyx, developer of an enterprise AI security platform, raised $113.0M of Series B venture funding led by Bessemer Venture Partners.

Groundcover, developer of an observability platform, raised $100.0M of venture funding led by One Peak Partners.

Eliyan, developer of a chiplet interconnect technology system, raised $145.0M of Series C venture funding led by Seligman Ventures at a pre-money valuation of $1.0B.

ChipAgents, developer of AI-driven tools for semiconductor design and verification, raised $131.0M of Series A venture funding led by Matter Venture Partners and B Capital.

Boddie & Associates, operator of a law firm, raised $130.0M of venture funding from undisclosed investors.

Commonwealth Fusion Systems, operator of an energy research company, raised $1.0B of venture funding from Plynth Energy and other undisclosed investors.

Qualified Health, developer of a generative AI infrastructure, raised $125.0M of Series B venture funding led by New Enterprise Associates.

Xsight Labs, developer of chipset semiconductors, raised $300.0M of venture funding led by Atreides Management and Fidelity Management & Research Company at a pre-money valuation of $2.5B.

Simile, developer of an AI-driven human behavior simulation platform, raised $200.0M of Series B venture funding led by Greenoaks at a pre-money valuation of $1.8B.

PhysicsX, developer of a physics AI software stack, raised GBP 225.0M of Series C venture funding led by Temasek Holdings at a pre-money valuation of GBP 1.58B.

K2 Space, developer of aerospace hardware products, raised $500.0M of Series D venture funding led by Kleiner Perkins and ICONIQ Capital at a pre-money valuation of $6.3B.

Function Health, developer of a preventative healthcare platform, raised $450.0M of venture funding from General Catalyst.

Odds of the Day 🍒 

Polymarket traders are pricing in a 56% chance of a rate hike in September, with 40% odds of no change.

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