The AI Trade Loses Air Again

Market Recap 30 October

Early in the week, the AI trade was alive and well again thanks to the Anthropic (ANT) IPO announcement and Broadcom's (AVGO) chip financing package. However, negative cash flow reports from Alphabet (GOOGL) and Amazon (AMZN) took all the air out of the balloon, and a report that ANT debt might receive a junk rating sent the markets substantially lower on Friday.

Anthropic, AI Financing, and Hyperscaler Capex

After a confidential SEC filing earlier this year, Anthropic (ANT) publicly announced its intent to IPO. The roadshow could begin the week of November 9, with trading possible before Thanksgiving and the company targeting a $100 billion raise at a $1.5 to $2 trillion valuation.

The next day, Broadcom (AVGO) announced that a group of banks will provide $63 billion¹ to buy its chips and networking gear, which will be leased to ANT. Nvidia (NVDA) said it will invest $3 billion² in Meta (META), which plans to raise $95 billion for AI infrastructure.

On Friday, the Financial Times reported that Blackstone, a lender in that $63 billion package, told investors ANT debt may not get an investment grade rating and that a "high" junk rating is possible.³ Blackstone had expected investment grade before year end, and no rating agency has published a rating yet.

The financing runs in a circle. Nvidia invests in Meta, Meta raises $95 billion for AI infrastructure that will presumably include plenty of Nvidia hardware, and banks fund Broadcom chips leased to a company whose debt might be rated junk.

Earnings showed who can afford to keep spending. Microsoft (MSFT) beat, stayed free cash flow positive, trimmed 2026 capex to $170 billion and rose 4% after hours. CFO Amy Hood guided Q2 capex to $50 billion, up from $45 billion in Q1, with more acceleration in the second half of 2027, which points to $200 billion or more next year. Alphabet (GOOGL) missed on revenue, posted negative free cash flow, reiterated $195 to $205 billion for 2026, said 2027 capex will "increase substantially"⁴ and fell 12.6% on Thursday. Amazon (AMZN) missed on earnings and revenue, posted negative free cash flow, held $220 billion for 2026 capex spend and promised "meaningfully more" in 2027.⁵

Microsoft showed the cash and the market rewarded them. GOOGL and AMZN were not able to and the market punished them.

Inflation, the Fed, and Oil

As expected, the Fed kept rates unchanged on Wednesday, but two voters dissented, wanting another quarter point hike. Chair Warsh also announced that starting in 2027 the Fed will continue to meet eight times a year but vote on rates at only seven of those meetings, and at only six in 2028.⁶ Inflation is running at 3.6% and the Fed's answer is fewer votes.

The economic data seemed to back the dissenters; Q3 GDP grew 3.4%, September PCE inflation rose to 3.6% from 3.4% in August, and core PCE rose to 3.1% from 3.0%. Initial jobless claims came in at 194,000 against 198,000 expected, so the labor market gives the Fed no reason to ease either.

Surprising absolutely no one, Chevron (CVX) and ExxonMobil (XOM) set record highs after blowout Q3 earnings, courtesy of the war in Iran. The same war feeding those profits is feeding the inflation numbers above.

Earnings outside of tech were a mixed bag. UPS (UPS) and FedEx (FDX), both proxies for the economy, beat top and bottom-line estimates and raised guidance, with FedEx lifting its full-year calendar 2026 earnings outlook and UPS rallying over 5%.⁷ Coca-Cola (KO) also beat and raised but fell 1.64%, GE Vernova (GEV) posted blockbuster numbers and traded down in the regular session, and Boeing (BA) missed on revenue, posted a wider loss and fell 10.69% despite better free cash flow and a record backlog.⁸

The Week Ahead

Midterm elections Tuesday and Friday's jobs report land on a market that just posted its third straight weekly loss. Payrolls are expected to come in around 55,000 to 65,000 with unemployment holding at 4.2%, after September's 29,000. A weak jobs number on top of 3.6% PCE inflation is a bad combination.

• Monday – October S&P and ISM US Manufacturing PMI. Earnings: Apple (AAPL).
• Tuesday – US Midterm Elections, October Job Openings and Labor Turnover Survey. Earnings: Advanced Micro Devices (AMD), Ferrari (RACE).
• Wednesday – ADP Private Payrolls, October S&P and ISM Services PMI. Earnings: McDonald's (MCD), Uber (UBER).
• Thursday – Initial Jobless Claims. Earnings: None of note.
• Friday – October US Non-Farm Payrolls, Unemployment Rate and Average Hourly Earnings. Earnings: None of note.

Closing Perspective

As always, our role is to look beyond the headlines and remain focused on what matters most for your long-term plan. Periods of volatility are a normal part of investing, even when driven by uncertain or unexpected events. We continue to monitor developments closely and will make thoughtful adjustments where appropriate. If you have any questions or would like to discuss your portfolio, we welcome the conversation.

Footnotes

¹ https://www.cnbc.com/2026/10/27/stock-market

² https://www.cnbc.com/2026/10/27/nvidia-invest-meta.html

³ https://www.ft.com/content/59383c7f-8d82-493f-bf01-d2e862a1018f?syn-25a6b1a6=1

⁴ https://www.cnbc.com/2026/10/28/alphabet-googl-earnings-q3-2026.html

⁵ https://www.benzinga.com/news/26/10/62724825/amazoncom-q3-2026-earnings-call-transcript

⁶ https://www.cnbc.com/2026/10/28/fed-meeting-today-live-updates.html

⁷ https://www.cnbc.com/2026/10/27/q3-earnings-resilient-consumer.html

⁸ https://www.cnbc.com/2026/10/27/stocks-making-the-biggest-moves-premarket-pypl-glw-ups-ko.html

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