October Market Commentary | AI Spending Meets Tighter Money

October’s market rotation reflects rising financing and return risks around AI spending, while resilient growth and higher bond yields support diversified portfolios.

• The Nasdaq 100 fell 6.6% in October, while the S&P 500 Equal Weight Index gained 5.0% and the Bloomberg US Aggregate Bond Index rose 2.4%.
• Amazon, Meta, Microsoft and Alphabet lifted combined capital spending to about USD 207 billion in the third quarter from USD 113 billion a year earlier, with another USD 232 billion planned for the fourth quarter; investors subsequently erased nearly USD 900 billion from their combined market value.
• AI-linked debt issuance reached USD 655 billion in US corporate markets through mid-October, compared with USD 394 billion in all of 2025, and analysts expect close to USD 1 trillion in 2027.
• Expected third-quarter S&P 500 earnings growth is about 30%, although Nvidia and Micron are projected to provide roughly 34% of the increase and 10 companies about two-thirds; growth is expected to slow to 18% in the first half of 2027.
• Gartner estimates that AI data-centre owners need USD 8.5 trillion of cumulative revenue through 2030 to earn a 12% return on invested capital, against forecast AI revenue of no more than USD 3.6 trillion.
• The 10-year Treasury yield reached 5.36% in early October, its highest level in 24 years, before falling below 5%; US third-quarter annualized growth reached 3.4%, while September inflation rose to 3.7% and unemployment reached 4.2%.

Takeaway: The author expects AI investment to continue but sees the gap between spending and forecast revenue as the main market uncertainty, supporting diversified portfolios with high-quality fixed income and limiting concentration in the most AI-exposed companies.