After a pronounced pullback in equities linked to artificial intelligence last week, the next round of corporate quarterly results - including those from Meta, Tesla and Texas Instruments - will provide a near-term checkpoint for investors assessing the resilience of the AI investment theme.
The scale of last week’s selloff was stark. The SOX semiconductor index suffered a weekly loss in excess of 10%, and CoreWeave, a builder of data-center capacity, plunged roughly 25% as investor concerns concentrated on names viewed as central to AI infrastructure.
Market participants are increasingly uneasy about a convergence of pressures: a rising cost of capital for large borrowers in the AI ecosystem, potential slowing in the rate of revenue expansion, and uncertainty over what AI developers will ultimately be able to charge customers for compute-intensive services. Those anxieties are likely to shape expectations and valuations as companies report third-quarter results in the coming days.
Among the corporate reports that will be monitored closely are third-quarter results from Meta, Tesla and Texas Instruments, among others. Analysts and investors will pay particular attention to the pace of investment spending - especially capital deployed on data-center, chip and AI-related infrastructure - to gauge how rapidly and extensively these firms are continuing to scale capacity.
The equity turbulence spilled into fixed income markets last week. Treasury yields retreated sharply as investors priced in the risk that any meaningful disruption to the dominant AI narrative could dampen growth and corporate demand for capital, even in the face of unexpectedly elevated US inflation readings for September. That downward pressure on yields extended into Monday morning.
Commodity markets added to the volatility. Brent crude surged to $110 per barrel on Friday for the first time since May amid worries about deteriorating dynamics in the Iran situation and the Russia-Ukraine conflict. By early trading on Monday, Brent had eased about 2% from those highs.
Over the weekend, there were reports of additional ships struck in the Gulf and a Ukrainian attack on a major Russian oil installation in St Petersburg. Attention then shifted to potential US moves on sanctions waivers for Russian crude - a policy lever aimed at relieving energy price pressures ahead of the US midterm elections. However, questions surfaced over Russia’s ability to sustain exports given wartime disruptions, and there were reported doubts from US Secretary of State Marco Rubio, who said President Trump would take up to 60 days to evaluate the consequences of waiving sanctions.
Broader macro signals offered mixed messages. China said third-quarter GDP growth accelerated to 4.5%, and softer retail-sales growth for September nonetheless beat forecasts. The yuan strengthened to another four-year high. Against that backdrop, Indonesia’s equities, already the worst-performing market of the year, slid further after index compiler MSCI indicated it may remove the country from its emerging market indexes over governance and transparency concerns. Indonesia’s benchmark index is down more than 40% year-to-date.
Chart of the day - Rocket or damp squib? SpaceX is slated to report on Tuesday, with consensus estimates pointing to roughly $12.7 billion of revenue and earnings of 14 cents per share. The report arrives amid controversy over alleged interruptions to Starlink services in Ukraine, speculation about a potential tie-up between SpaceX and Tesla - which is itself reporting this week - and the recent strain on AI financing that contributed to last week’s market volatility.
SpaceX’s market valuation metrics show that, at a share price of $146, the stock stands about 8% above its June IPO level, while Wall Street’s median 12-month price target sits near $221.
Economic and market events to watch today include the US October NAHB Housing Market Index at 10:00 a.m. EDT and Canada’s September Consumer Price Index at 8:30 a.m. EDT.
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