Good morning investors,
Markets are set to close out a volatile October on a high note as Big Tech's AI spending bonanza gets rewarded with strong earnings beats from Amazon and Apple. The Trump-Xi trade truce takes immediate tariff escalation off the table, though fundamental tensions remain. As we head into November, the earnings season narrative is clear: those who can monetize AI win, those who just spend on it lose.
Opening Bell: Tech Optimism Returns
S&P 500 futures jump 0.7% with Nasdaq futures up 1.2% as Amazon and Apple earnings restore faith in Big Tech's AI investments. Amazon surges 13% premarket after AWS growth accelerated to 20%, its fastest pace in years. Apple gains 2% after forecasting double-digit iPhone growth for the holiday quarter. Netflix rallies 3% on a 10-for-1 stock split announcement.
Meta's bond offering of up to $30 billion, its largest ever, signals the capital intensity of the AI race isn't slowing. Oil majors Exxon and Chevron both beat estimates despite lower crude prices, with Chevron's production hitting records following its Hess acquisition. October is on track to be the S&P 500's sixth positive month in a row, up 2% despite historical volatility.
Amazon's AWS Validates AI Spending
Amazon delivered the quarter that Meta couldn't, proving AI infrastructure spending can drive immediate growth. AWS revenue surged 20% to $33 billion, crushing the 18% expected and marking its fastest growth in years. The acceleration is particularly impressive given AWS's massive scale, now approaching a $132 billion annual run rate.
What separates Amazon from Meta is monetization clarity. While Meta faces questions about converting AI spend into profits beyond ads, Amazon's cloud business provides an immediate revenue stream from enterprise AI adoption. The company raised Q4 guidance to $209.5 billion, beating consensus by $1.4 billion.
CEO Andy Jassy confirmed capital expenditures will hit $125 billion this year and go higher in 2025, but unlike Microsoft's margin compression fears, Amazon's 24% EPS beat shows it can invest heavily while expanding profitability. After lagging peers all year with just 2.4% gains versus Microsoft's 24% and Google's 49%, Amazon may finally get its catch-up rally.
Apple's iPhone 17 Supply Constraints Signal Strength
Tim Cook's declaration that iPhone 17 reception is "off the chart" with supply constraints across multiple models delivered exactly what investors needed to hear. The company forecast 10-12% December quarter growth with double-digit iPhone growth, implying roughly $137 billion in revenue versus $132 billion consensus.
The supply constraints are a high-quality problem that signals demand strength extending into 2026. Services revenue hit $28.75 billion, up 15% with accelerating growth across most components. This recurring, high-margin stream remains Apple's most important driver for valuation expansion.
China returning to growth removes a major overhang, with Cook expecting positive momentum in the December quarter. The company absorbed Trump tariff costs while still beating margin expectations at 47.2%, demonstrating pricing power that few companies possess. By mid-2026, I see Apple reaching $350 as iPhone momentum, Services growth, and AI capabilities converge.
Nvidia's Asian Expansion
Nvidia announced partnerships to supply over 260,000 AI chips to South Korean companies including Samsung, SK Group, and Hyundai, part of the country's push for AI sovereignty. The deals bring South Korea's Nvidia chip count from 65,000 to over 300,000, representing billions in guaranteed revenue.
Samsung alone will deploy 50,000 GPUs in an "AI Megafactory" starting construction in 2026. These sovereign AI deals are Nvidia's answer to lost China revenue, with similar agreements in UAE, Saudi Arabia, and Europe expected to contribute $20+ billion in fiscal 2026. At $5 trillion market cap, Nvidia continues finding new growth vectors as nations treat AI infrastructure like critical national security assets.
Netflix's Split Signals Maturity Questions
Netflix's 10-for-1 stock split effective November 17 changes nothing fundamentally but raises interesting questions about growth trajectory. The streaming leader cited making shares "more accessible to employees," though at $1,089 per share, retail investors can already buy fractional shares on most platforms.
My read: companies typically split when seeking Dow Jones inclusion or when core growth is slowing and they need other catalysts. Netflix has split twice before, in 2004 and 2015, both during massive growth phases. This time feels different, coming as streaming competition intensifies and subscriber growth moderates. The stock is up 42% year-to-date, but the split may signal management sees fewer organic growth levers ahead.
Energy Resilience Despite Headwinds
Exxon and Chevron both beat estimates despite crude falling 16% this year. Chevron's production hit 4.1 million barrels per day, up 21% after the Hess acquisition. Exxon's Guyana assets reached 700,000 bpd while Permian production approached 1.7 million bpd.
The results show how consolidation creates scale advantages even in down cycles. Both companies are returning massive cash to shareholders, with Exxon distributing $9.4 billion in Q3. As OPEC+ increases production and Trump tariffs weigh on global demand, only the strongest operators will thrive.
Coinbase Rides Crypto Momentum
Coinbase crushed estimates with net income quintupling to $432 million as trading volume hit $295 billion. The Trump administration's crypto-friendly stance, including the first federal stablecoin framework, has opened regulatory doors. USDC stablecoin holdings hit record highs above $15 billion.
The company's evolution from trading platform to comprehensive crypto financial services provider accelerates with acquisitions of derivatives exchange Deribit for $2.9 billion and blockchain platform Echo for $375 million. Partnerships with JPMorgan, PNC, and Citi for crypto services validate institutional adoption. At just 34% year-to-date gains, Coinbase has room to run as regulatory clarity drives mainstream adoption.
Final Thought
October delivered the volatility I've been warning about, but Big Tech earnings are revealing clear winners and losers. The market is done rewarding AI spending for spending's sake. Amazon and Google prove you need monetization paths today, not tomorrow. Meta's 11% Thursday plunge despite beating estimates shows even patient investors have limits.
Apple's supply constraints and Amazon's AWS acceleration validate that AI demand is real and growing. The Trump-Xi truce removes near-term tail risks, though technology competition will only intensify. Nvidia's sovereign AI deals show nations treating compute like oil reserves, fundamentally changing infrastructure investment dynamics.
As we close October with the S&P 500's sixth straight monthly gain, remember that November historically favors bulls. But with the Fed divided, government data still dark from the shutdown, and Big Tech capex approaching $500 billion annually, execution matters more than ever. Companies that can turn AI investment into revenue today will separate from those selling tomorrow's promises.
The setup heading into year-end looks constructive, but stay selective. I remain bullish on Alphabet's discount valuation, Amazon's catch-up potential, and Apple's iPhone supercycle. Meta at 24x forward earnings looks oversold if you can stomach another quarter of massive spending. Energy majors offer value for patient investors as consolidation creates fortress balance sheets.
Have a great weekend, and as always, feel free to reach out with questions about positioning for November's opportunities.
Best regards,
Dan Sheehan
This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.