1. AI and tech firms' profits have, so far, mostly beaten Wall Street’s high expectations. Can they continue to do so?

JPMorgan says AI-related stocks, which they narrow down to just 41 names, have accounted for 75% of S&P 500 returns, 80% of earnings growth and 90% of capital spending growth since ChatGPT launched in November 2022. That’s an extraordinarily heavy burden for so few companies.
The outlooks provided by the CEOs and CFOs of these 41 firms in the coming weeks could indicate whether a market correction could be on the horizon – and just how large it could be.
AI is far and away the biggest investment boom in US history. Could it also end up being the biggest misallocation of capital?

2. AI hardware selloff.

A Financial Times report that OpenAI’s annualized revenue runs $20 billion below what had been signaled before, leading to a correction on the Philadelphia semiconductor index.
The investor presentation still showed 77% total run-rate growth during the third quarter and 107% growth for the enterprise business.
That’s still impressive but maybe not enough to justify the $852B valuation for the coming IPO.

3. Feeding the AI beast/monster.

Investor angst over AI bellwethers' seemingly insatiable appetite for capital to build the infrastructure necessary for the technology to start paying off has cast a shadow over markets, as worries about valuations and fears over profitability persist.
Morgan Stanley estimates that AI infrastructure will require $1.5 trillion in external financing by 2028, with fundraising happening just as interest rates across the globe rise to combat the inflationary pressure from higher energy prices.
That makes it more expensive to finance facilities whose returns may take years to materialise, while investors are also demanding greater visibility into the customers and cash flows that will support those investments.
Panmure Liberum’s head of strategy said his base case is for that trade to disintegrate as soon as 2027, sending stocks sharply lower.
“My core conviction is that the AI bubble will either burst in 2027 or in 2028, so sometime in the next two years,” Klement said in an interview. Hyperscalers’ free cash flows are largely depleted, while the cost of debt is rising quickly and becoming prohibitive for these firms, he said.

4. LVMH disappoints.

The luxury sector is down 18% year-to-date, leaving it among the region’s weakest performers. Multiples have compressed below historical norms, with questions around whether demand is close to a durable trough.
Third-quarter reporting began yesterday with LVMH.
Overall, while market expectations were low going into the print, tonight's statement is likely to be viewed as disappointing by the market. The key sentiment driver for the shares – and highest margin division – Fashion & Leather Goods posted a -5% contraction YoY vs. -1.6% expected by consensus. The main driver of the sequential deterioration was the greater-than-expected contraction of sales to Chinese nationals.
The shares are down about 40% year-to-date, meaning a significant amount of pessimism has already been reflected in the price.

5. US and European telecom stocks tumble over growing competition from satellite-based mobile services.

SpaceX bought some spectrum, but spectrum alone won’t solve everything. Reliable indoor coverage in cities would likely require ground-based towers.
So, telecom tower operators bucked the sector-wide selloff, as investors bet SpaceX's wireless ambitions could ultimately drive demand for additional terrestrial infrastructure.
Incumbent Telcos have argued that satellite faces a number of physical limitations to servicing the wireless mass market.

AT&T CEO John Stankey noted that satellite "is solving the last 2%, not trying to come up with a new way to solve the 98%".

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