Morning Wrap: AI profitability concerns spark market Sell-Off

📈 Stock Market

• Yesterday's session on Wall Street ended with a sharp sell-off, driven by concerns over massive capital expenditure on artificial intelligence development and its future profitability.
• The tech-heavy Nasdaq fell by approximately 2.6%, recording its worst single-day performance since June and breaking below its 100-day moving average, deepening fears of a further correction in the tech sector.
• The S&P 500 index lost over 1.2%, while only the Dow Jones managed to fend off declines, ending the day with a symbolic gain.
• Selling pressure swept across six of the seven largest US tech companies, with the heaviest losses seen in Meta (−8%), Amazon (−5.1%), and Nvidia (−4.4%).
• Amid the broader market sell-off, Apple stood out positively, rising by about 0.9% as the sole gainers in the "Magnificent 7" group.
• The sell-off also hit semiconductor manufacturers, including AMD and Intel, which both lost around 8%.
• Downward pressure transferred from the US dominates Asian stock markets today, with Japan's Nikkei 225 down 0.6% and South Korea's KOSPI dropping 0.7%.

🏛️ Companies & AI Sector

• OpenAI is close to securing up to $30 billion in new funding at a valuation of $1.25 trillion (led by Coatue Management and UAE investors), serving as a bridge ahead of its IPO planned for 2027.
• OpenAI's urgency in raising capital is linked to the market debut of rival Anthropic, scheduled for November, as well as rising uncertainty around AI company valuations and infrastructure costs.
• Western Digital reported a very strong start to fiscal year 2027, boosting revenues by 55% YoY to $4.38 billion and generating adjusted EPS of $4.64, well beating analyst expectations.
• Despite optimistic forecasts for HDD drives driven by data center demand, Western Digital shares fell sharply, reflecting market worries over costs, capex, and elevated expectations for AI-linked companies.

🏛️ Macroeconomics & Monetary Policy

• Inflation in Japan is accelerating again, with September core CPI rising to 2.1% YoY (from 1.7% in August), surpassing the Bank of Japan's (BoJ) target for the first time in 9 months.
• Japan's core index excluding food and energy accelerated to 2.4% YoY (compared to 1.9% the previous month), strengthening the yen and raising market expectations for a rate hike in December from 1.25% to 1.50% (with the risk of eventually exceeding 2%).
• Donald Trump invoked the Defense Production Act, deeming domestic oil production and refining critical to US national security, enabling federal financial support and production capacity expansion.

📊 Debt & Bonds

• US 10-year Treasury yields are falling toward the 5% mark, signaling rising risk aversion and capital rotation away from a weakening stock market into safe-haven government bonds.

🛢️ Commodities & Energy

• Crude oil prices remain at very high levels, with Brent crude rising to around $114 per barrel following Thursday's spike of approximately 4%, fueled by escalating tensions in the Middle East and the risk of renewed attacks on Iran.
• Concerns over supply disruptions and a lack of diplomatic breakthroughs sustain uncertainty around maritime transit through the crucial Strait of Hormuz.
• High fuel prices are hitting consumers, with US gasoline prices exceeding $4 per gallon and Brent crude reaching its highest levels since May.
• Weakness persists in the precious metals market: gold contracts remain slightly above $4,000 per ounce, while silver is down over 1%, falling below $54 per ounce under pressure from expectations that the Fed will keep interest rates higher for longer.

🪙 Cryptocurrencies

• Sentiment in the crypto market is slightly more positive, with Bitcoin gaining about 0.2% and holding above $81,000.
• Modest gains are also being recorded by Ethereum, which is testing resistance around $2,400.