Morning Wrap: Wall Street's Tech Slowdown: Massive AI Investments Spark Growing Concerns

📈 Stock Markets & Equities

• Yesterday's session on Wall Street ended in the red, although losses were somewhat trimmed towards the close: the Dow Jones fell by over 0.2%, the S&P 500 slipped 0.3%, while the tech-heavy Nasdaq dropped nearly 1.4%.

• The primary catalysts behind the sell-off were disappointing earnings from major tech giants alongside mounting concerns regarding the profitability of massive artificial intelligence investments.

• Following the closing bell, Amazon reported its quarterly earnings; despite delivering strong operating results, the company failed to sustain investor momentum, sending its shares down by as much as 7% in after-hours trading.

• Amazon's revenue increased by 12% YoY, with the AWS cloud division posting impressive growth of 39.3%, yet overall figures slightly missed analyst consensus estimates.

• The greatest concern stems from the scale of planned AI capital expenditures – Amazon aims to allocate approximately $220 billion in 2026, against the backdrop of a current negative Free Cash Flow (FCF) standing at $42.4 billion.

• Intel suffered a major setback; even though third-quarter earnings topped analyst expectations, shares plunged by 20–23% in extended trading.

• Intel's primary headwind was weak guidance for the upcoming quarter – the company projects revenue in the range of $15–16 billion, trailing the market consensus of around $17 billion, driven largely by soft PC demand and escalating memory prices.

• In addition, Intel continues to face production capacity constraints that impede its ability to meet surging demand for server processors.

• Asian markets dropped sharply in response to disappointing earnings from US tech leaders and escalating skepticism over AI return on investment – the South Korean KOSPI tumbled over 4%, while Japan's Nikkei declined by more than 2%.

• Technology firms and semiconductor manufacturers were hit particularly hard, notably Samsung and SK Hynix, as investors worry that substantial capital outlays by Amazon, Intel, and Alphabet on AI infrastructure will not yield the anticipated profits and cash flows.

🌐 Macroeconomics & Monetary Policy

• The Bank of Japan left interest rates unchanged at 1.25%, a move that may surprise some market participants given the central bank's acknowledgment that domestic inflation has already hit its 2% target.

• The BoJ opted for a wait-and-see approach to evaluate how previous rate hikes are filtering through to broader economic conditions and consumer spending.

• At the same time, the Bank of Japan raised its 2027 inflation forecast from 2.4% to 2.6%, suggesting that price pressures could prove more persistent than initially anticipated.

• Several board members advocated for an immediate rate hike to 1.5%, while the broader market is pricing in a potential move in December, a scenario that could bolster the Japanese yen and weigh on domestic equities.

• Underscoring persistent inflationary pressures, the latest Tokyo CPI data for October came in at 2.8% YoY versus expectations of 2.7% (matching the previous month's 2.7%), while core CPI (excluding fresh food) printed at 2.6% YoY, matching forecasts.

🌍 Geopolitics

• Donald Trump reiterated that the war with Iran will end "very quickly", suggesting that Washington could resolve the standoff through either diplomatic or military avenues, emphasizing that Iran's military capabilities have been substantially degraded.

• While an end to the conflict is anticipated to prompt a sharp drop in crude oil and fuel prices, markets remain cautious amid the absence of a concrete peace agreement and fraught negotiations.

• Geopolitical risk remains elevated as the US administration is reportedly considering resuming military strikes against Iran following the midterm elections scheduled for November 3.

• Tehran has hardened its negotiating posture – Iranian Parliament Speaker Mohammad Bagher Ghalibaf stated that any diplomatic progress remains conditional on the US accepting a seven-point framework.

• Iran's core demands include: an immediate cessation of hostilities across all fronts, the unfreezing of roughly $12 billion in Iranian assets, the lifting of economic sanctions, an end to the US maritime blockade, the withdrawal of US forces from the region, war reparations, and guarantees against future interference in internal affairs.

🛢️ Commodities & Precious Metals

• The crude oil market demonstrated relative resilience compared to other asset classes – front-month Brent crude futures hovered around $112 per barrel, while WTI crude traded near $103 per barrel.

• Bearish sentiment dominated the precious metals complex: gold retreated below the $4,000 per ounce mark, while silver dropped nearly 2% to trade below $51 per ounce.

🪙 Cryptocurrencies

• Digital asset markets faced renewed selling pressure following a massive security breach at Binance, with stolen assets estimated at roughly $5.9 billion (nearly four times the size of the Bybit exploit).

• In response, Binance temporarily suspended deposits and withdrawals, assuring market participants that all user losses will be fully covered using corporate reserves and its emergency fund (SAFU).

• The incident weighed heavily on broader crypto sentiment: Bitcoin slipped below $79,000, while Ethereum fell nearly 1.5% to approach the $2,200 level.