AMD Surges, Tech Leads S&P 500 to Record 32nd High

Good Morning Investors,

Markets extended their record-setting streak Monday with the S&P 500 ($SPY ( ▲ 0.5% )) advancing 0.4% to its 32nd all-time high of 2025 and the Nasdaq ($QQQ ( ▲ 0.75% )) surging 0.7% to its 31st record close, while the Russell 2000 ($IWM ( ▲ 0.36% )) crossed 2,500 for the first time. AMD's ($AMD ( ▼ 1.46% )) 24% surge on OpenAI partnership drove technology leadership, with multiple prominent Wall Street voices raising year-end targets as AI infrastructure momentum overwhelms government shutdown concerns entering week two.

Futures trade flat Tuesday as markets digest Monday's gains and await potential progress on government shutdown negotiations, with President Trump indicating willingness to discuss Democratic healthcare subsidy demands. The S&P 500's seven-day winning streak and concentration in mega-cap technology creates conditions for tactical consolidation, though broader market strength with Russell 2000 at records suggests healthy participation expansion.

Today's light economic calendar features New York Fed one-year inflation expectations and consumer credit data, with earnings from McCormick and Constellation Brands providing consumer insights. The data blackout continues delaying critical economic releases, though investors appear comfortable navigating uncertainty as AI deal momentum and M&A acceleration drive positioning.

AMD's 24% Monday surge on OpenAI's 6 gigawatt GPU deployment agreement and potential 10% warrant-based stake validates the chipmaker's multi-year effort competing against Nvidia's AI accelerator dominance. CEO Lisa Su's assertion to Yahoo Finance that thinking around AI investment is "too small" reflects industry conviction in infrastructure buildout sustainability despite circular financing concerns.

However, the deal highlights OpenAI's unique vulnerability relative to established technology giants. As DataTrek's Nicholas Colas observed, OpenAI lacks the fallback revenue streams characterizing its partners: no social media network, advertising machine, hardware ecosystem, e-commerce platform, or cloud storage empire. While ChatGPT claims top App Store rankings and Sora demonstrates innovation, OpenAI operates without the profitable legacy businesses allowing tech giants to fund AI investments within operating cash flow constraints.

This creates dependency on continued capital market access and partnership monetization. The intertwining agreements with Nvidia ($100 billion), AMD (6 gigawatts), Oracle (infrastructure), and Broadcom (custom chips) make OpenAI "too big to fail" through strategic positioning, but concentration risk persists if AI adoption disappoints or capital markets tighten.

Nvidia's 1.1% Monday decline reflects competitive pressure recognition, though its $100 billion OpenAI investment and dominant market position provide substantial cushion. The circular financing, where Nvidia invests in OpenAI which then purchases Nvidia chips, creates the closed-loop value transfer critics highlight as potentially unsustainable.

Multiple respected strategists raised or reiterated bullish year-end targets Monday, with Ed Yardeni restoring his S&P 500 forecast to 7,000 and Evercore ISI's Julian Emanuel maintaining 7,750 while noting a "bubble scenario" could drive the index to 9,000 by end-2026. These targets, while aggressive relative to my more conservative 6,800, reflect growing conviction that AI-driven productivity gains and elevated P/E ratios represent permanent structural shifts rather than temporary valuation anomalies. I do however have the 7,000 price target for mid 2026.

The key debate centers on whether current 22-23x forward earnings multiples versus 18-19x historical averages reflect justified optimism about AI transformation or speculative excess reminiscent of dot-com era. History suggests technology revolutions often validate seemingly absurd valuations retrospectively, though timing and execution separate winners from cautionary tales.

I maintain my 6,800 year-end target while acknowledging momentum could drive higher, particularly if Q3 earnings beginning this week with major banks validate profit growth supporting current levels.

The Russell 2000's breach of 2,500 to close at record highs Monday validates my thesis about catch-up potential in small and mid-cap stocks. Truist Wealth co-CIO Keith Lerner's observation about "concentration risk" and noting "a little bit of outflow and inflows into small caps can go a long way" captures the positioning dynamic supporting continued outperformance.

Regional bank merger activity, reduced regulatory friction under Trump administration, and rate cut expectations disproportionately benefit smaller companies with higher leverage and domestic revenue exposure. I continue expecting this rotation to persist through October and November before Magnificent Seven leadership potentially reasserts into year-end.

The combination of mega-cap records and small-cap breakouts suggests healthy market breadth that addresses concentration concerns plaguing 2025's advance. This broadening participation creates more sustainable foundation for continued gains than narrow leadership would provide.

ICE's $2 billion Polymarket investment at $8 billion valuation demonstrates prediction markets achieving mainstream institutional acceptance. ICE shares rose 3% pre-market on the announcement, with CEO Jeffrey Sprecher highlighting opportunities "which ICE together with Polymarket can uniquely serve."

Piper Sandler projects prediction markets industry revenue climbing to $8 billion by 2030 as it captures share from sports gambling. Polymarket's earlier investment from 1789 Capital (backed by Donald Trump Jr.) and recent U.S. launch approval position the platform advantageously as regulatory clarity emerges.

This represents another example of alternative financial infrastructure gaining legitimacy, similar to Bitcoin ETFs achieving mainstream adoption. The convergence of traditional finance and emerging platforms creates investment opportunities beyond conventional asset classes.

Trilogy Metals ($TMQ ( ▲ 2.17% )) shares surging 220% pre-market Tuesday following White House announcement of 10% stake ($35.6 million investment) plus warrants for additional 7.5% demonstrates Trump administration's aggressive critical minerals strategy. The investment enables Ambler mining district development in Alaska, reversing Biden administration's project rejection.

This follows similar government stakes in Lithium Americas, MP Materials, and Critical Metals, establishing pattern of strategic equity investments in domestic mining operations. China's dominance of critical minerals supply chain (producing 70% of rare earths, processing 90%) creates national security imperative driving this policy.

The IEA projects lithium demand growing fivefold by 2040 with copper and cobalt seeing 30-50% increases, validating long-term investment thesis in transition metals despite near-term volatility. Government backing de-risks development while advancing domestic supply chain resilience.

Constellation's fiscal Q2 beat (EPS $3.63 vs. $3.38 expected) occurred alongside 15% revenue decline and lowered full-year guidance reflecting "challenging macroeconomic environment." CEO Bill Newlands cited dampened consumer demand particularly among Hispanic consumers concerned about immigration policies and job losses.

The company maintained guidance for 4-6% organic sales decline versus prior expectation of 1% growth to 2% decline, with aluminum tariffs pressuring operating margins 200 basis points. Shares rose 3% in extended trading on the beat, though results underscore consumer spending bifurcation with lower-income cohorts reducing discretionary purchases.

This contrasts with earlier Costco results showing resilient membership spending and traffic, suggesting value-oriented retailers and premium brands outperforming mid-tier consumer discretionary.

World Bank raising China 2025 GDP forecast to 4.8% from 4.0% reflects government stimulus effectiveness and export resilience despite U.S. tariffs. Chinese exports to Southeast Asia and Europe offset sharp U.S. decline, with businesses front-running higher tariffs supporting shipment volumes.

However, 2026 growth projected at 4.2% anticipates stimulus reduction to control debt levels and slower export momentum. The real estate slump and tepid consumer spending remain drags requiring continued policy support.

China's economic trajectory matters for global growth and commodity demand, particularly transition metals where Chinese manufacturing dominance drives consumption patterns.

Bitcoin's advance above $125,000 Monday to fresh all-time highs creates critical technical test at $124,517. I'm monitoring whether we maintain this breakout or risk double-top formation similar to January's pattern preceding selloff. Failure to hold $124,517 would target $121,000 support before another advance attempt.

The RSI near 71 and stochastic at 89 suggest overbought conditions increasing retracement probability, though moving averages across timeframes maintain bullish signals. I continue expecting Bitcoin to reach $150,000 by year-end supported by Q4 seasonality and Fed accommodation, viewing any pullback to $121,000 as healthy consolidation rather than trend reversal.

The S&P 500's seven-day winning streak to 32 record closes in 2025 reflects powerful momentum driven by AI infrastructure deals and M&A acceleration.

I maintain conviction in 6,800 year-end target while acknowledging Wall Street's growing bullishness (Yardeni 7,000, Emanuel 7,750) could prove correct if earnings validate current valuations. Bank earnings beginning this week provide the critical test of profit growth supporting premium multiples.

Small-cap strength, regional bank M&A, and Bitcoin records demonstrate healthy breadth supporting continued advance. Quality companies with operational excellence, AI integration, and domestic exposure remain preferred positioning.

Markets extended records Monday driven by AMD's 24% surge on OpenAI partnership and Russell 2000 breaking 2,500 for the first time. The combination of mega-cap technology leadership and small-cap breakouts suggests healthy participation expansion addressing concentration concerns.

Wall Street strategists raising year-end targets (Yardeni 7,000, Emanuel 7,750 with 9,000 "bubble scenario") reflect growing conviction in AI transformation sustainability. While my 6,800 target remains more conservative, momentum clearly favors continued strength as earnings season begins validating profit growth.

Government shutdown entering week two creates data blackout but markets demonstrate comfort navigating uncertainty. President Trump indicating willingness to negotiate healthcare subsidies suggests potential resolution path, removing tactical overhang.

Small and mid-cap catch-up performance continues as I anticipated, with regional bank consolidation and reduced regulatory friction supporting outperformance. Bitcoin testing critical $124,517 level with $121,000 support viable before next advance attempt toward my $150,000 year-end target.

Dan Sheehan

[email protected]

This newsletter is for informational purposes only and should not be considered investment advice. Please consult with your financial advisor regarding your specific situation.