AI Trade Continues to Cool as Earnings and Fed Decision Pose Dual Tests Next Week
nashnova research
Alphabet, Microsoft, and Amazon report Q3 earnings the same week the Fed meets and the PCE inflation print lands — whether AI tech stocks can stop bleeding hinges on all three.
How extreme was October's sector split?
The Nasdaq Composite fell more than 3% for the month; the S&P 500 also slipped. The Dow, buoyed by defensive sectors, rose nearly 3%.
Within tech the damage was sharper: semiconductors dropped over 15%, memory stocks over 20%, and the "Magnificent Seven" shed more than 2%.
Yet software and cybersecurity names finished the month higher. This means → the market is not dumping tech wholesale — it is surgically cutting exposure to AI hardware spend.
Why did Meta and Tesla earnings split the market?
Meta posted its first-ever quarter of negative free cash flow — meaning the cash it burned exceeded what it earned. The stock fell more than 8% this week.
More alarming: Meta's five-year CDS spread — a measure of how likely the bond market thinks a default is — hit an all-time high. This means → even the credit market is now voting against Meta's AI spending pace.
Tesla also disclosed heavy spending on emerging tech. It sold off initially but recovered, ending the week up over 5%. In plain terms = two companies spending aggressively on AI, one punished, one rewarded — investors are deeply divided on whether the spend is worth it.
What will the market watch hardest in next week's Big Three reports?
Alphabet and Microsoft report Wednesday; Amazon follows Thursday. The key metric is not revenue — it is capital-expenditure guidance, signaling how much more they plan to pour into AI infrastructure.
Evercore internet-research head Mark Mahaney estimates the three hyperscalers may disclose capex plans roughly $100 billion higher than previous figures.
But Mahaney also notes prices have already pulled back sharply — Alphabet fell over 5% this week, Amazon and Microsoft about 1% each. "The fear is already in the stock," he said. This means → if the three announce no need for large-scale fundraising, shares could actually bounce.
The market is skeptical of potentially positive news in tech, and that's noteworthy. That's why I'm very much looking forward to watching next week.
Mark Hackett
Chief Market Strategist, Nationwide Investment Management Group
(weekly market commentary)
Reported earnings look strong — so why is the market still falling?
Over 160 S&P 500 companies report next week. Among those already in, 82% beat expectations with earnings growth around 30%.
This reflects a paradox: aggregate earnings-season numbers are solid, yet scrutiny of the tech sector has visibly tightened.
In plain terms = beating estimates is no longer enough — investors now demand proof that the money going into AI can produce measurable returns.
Why does this Fed meeting matter more than the rate itself?
Markets widely expect the Fed to hold rates at 3.75%–4.00%. But the "hold" itself puts the Fed in a bind.
EY-Parthenon chief economist Gregory Daco warned: "Tough talk alone is not sufficient. If they cannot deliver on their commitments, markets will begin to question the Fed's credibility."
Context: since the September meeting, oil prices have pushed inflation higher, jobs data came in soft, and officials including Vice Chair Philip Jefferson and New York Fed President John Williams have signaled "no rush to hike." This means → the market is not listening for a rate number — it is listening for whether the Fed's hawkish stance still holds.
What signal will the PCE print send?
The day after the decision, September PCE — the personal-consumption-expenditures price index, the Fed's preferred inflation gauge — will be released.
Markets expect headline PCE to rise 0.5% month-on-month, down from 0.9% — a surface-level cooldown.
But core PCE — stripping out food and energy — is forecast at 3.1% year-on-year, up from 3.0%, still well above the Fed's 2% target. In plain terms = headline inflation is easing, but the stickiest part is actually rising — exactly the combination the Fed dreads most.
市场有风险，内容仅供研究参考，不构成投资建议。