Weekly Investment Perspective

U.S. equities sank last week as renewed U.S.–China trade tensions took center stage, and the ongoing government shutdown added more clouds to the outlook. For the week, S&P 500 fell 2.4%, the Dow dropped 2.7%, and the Nasdaq declined 2.5%. Small cap stocks fared a bit worse with the Russell 2000 posting a 3.3% decline after surging almost 30% from the index’s post-Liberation Day lows. While negative trade headlines drove sentiment, the AI secular growth narrative continues to underpin market momentum as further data center buildout announcements over the last few weeks have fueled rising investment expectations through the end of the decade.

The latest round of heightened trade tensions stems from China tightening export controls on rare earth metals that serve a critical role in many high-tech devices from smartphones to electric vehicles as well as many defense applications. China dominates the production of rare earths providing over 90% of the world’s supply. In response, President Trump threatened 100% tariffs on Chinese imports starting November 1 and floated additional export restrictions. Adding to the pressure, Beijing also rolled out reciprocal port fees on U.S.-linked ships and stepped-up customs inspections targeting advanced semiconductors, while reports flagged fresh antitrust scrutiny of U.S. chipmakers. Rhetoric de-escalated a bit over the weekend, with President Trump posting on social media, “Don’t worry about China, it will all be fine.” Hopes for easing tensions helped fuel a bit of a bounce back for markets on Monday, but trading activity remains volatile as the U.S. and China seek leverage in trade negotiations.

On the economic front, data remains sparse given the government shutdown that has furloughed over 750,000 workers, but investors continue to sift through economic updates from non-government sources. The University of Michigan’s early October consumer sentiment reading was essentially unchanged at 55.0, though expectations for future finances and durable goods purchases softened. With many releases paused, the Bureau of Labor Statistics said it will still publish September CPI on Friday, October 24, to accommodate Social Security obligations, which will help give an important data point for the Federal Reserve as they determine the next step for monetary policy in the final week of October.

Meanwhile, the AI-capex narrative continues to provide a supportive offset through all of the geopolitical and government policy noise. In recent weeks, OpenAI, the company behind ChatGPT, has made several eye-popping announcements to secure sufficient data center resources to support its ambitious growth targets. Including a recent collaboration announcement with Broadcom to design and deploy new AI chips that will consume 10 gigawatts (GW) of electricity. They are now tracking toward compute commitments totaling 30 GW of power consumption by the end of the decade, including a recent collaboration announcement with Broadcom to design and deploy new AI chips that will consume 10 gigawatts (GW).”

OpenAI management estimates each gigawatt of cutting-edge AI infrastructure can cost $50–60B, implying on the order of ~$1.5T in aggregate capex if fully executed over time. For scale, Reuters notes 10 GW is “enough to power over 8 million U.S. homes”; by simple extrapolation, 30 GW would equate to ~24 million homes. We would caution that many details remain opaque, these deals are milestone-based and phased over years, and the eventual mix of suppliers, financing, and sites may change, including looking outside of the U.S. for some of the data center builds due to power and land constraints.

Investors are now turning their attention to third quarter earnings season that has kicked off with large financial institutions. With a blackout on official government data during the shutdown, investors are turning to the banks for clues about the economy. Several major banks—including JP Morgan, Citibank, and Wells Fargo—reported solid earnings results this morning with support from robust market trading and M&A activity, but the bar of expectations was high coming in, and there is some scrutiny on rising expected credit loss provisions.

Beyond earnings and trade, the shutdown remains a central macro swing factor. The Senate is expected to vote again, but there remains limited progress toward a resolution as the shutdown enters its third week. It has already delayed the October jobs report and could muddy near-term visibility on inflation, growth, and spending. Until the shutdown is ended and normal economic data flow is restored, investors will lean even more on company quarterly commentary and guidance, high-frequency indicators, and global cues. As always, we are emphasizing quality balance sheets, diversified exposures, and measured participation in secular growth areas—while staying mindful that policy-driven volatility can cut both ways.

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