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US stocks wobble as small caps lead; oil trades the rumor, then the denial
On Tuesday, US stocks were pulled back and forth between rumors of a "US-Iran compromise" and subsequent denials. The Dow rose 1.02%, the S&P 500 gained 0.28% (with more than 400 constituents advancing and the index reclaiming its 50-day moving average), the small-cap Russell 2000 led the way with a 1.66% surge, while the Nasdaq Composite slipped just 0.02%. Nine of the S&P 500's 11 sectors rose and two fell, with healthcare up 2.34% and real estate up 1.69% leading gains, while communication services fell 0.89% and technology fell 0.34% to bring up the rear.
In early trading overnight, Qatari media reported that the US and Iran had tentatively accepted a Pakistani-mediated proposal and could reach a ceasefire agreement as soon as this week. The news instantly detonated short positions, with Brent crude touching a five-month high of $111.99 intraday before plunging more than 3.3% in a straight line and briefly breaking below $106. However, shortly afterward, diplomats involved in the negotiations urgently denied the reports, calling claims that a deal was imminent seriously inaccurate. Tehran went further, reiterating in tougher terms that it would not compromise until the US met "seven conditions" including lifting sanctions and the blockade, and that "not a single particle of enriched nuclear material will leave Iran." Oil prices then sharply narrowed their losses from the lows, with Brent ultimately settling down 0.69% at $108.79, while the November WTI contract settled down 1.80% at $101.79.
In Europe, the energy crisis cloud shows no sign of lifting. The Dutch TTF benchmark natural gas price briefly broke above €90 per megawatt-hour intraday. Rabobank strategists expect that, with Asian LNG storage at its lowest level for this time of year since 2009, a winter energy scramble could be ignited. Meanwhile, France's sovereign debt and fiscal deficit crisis continues to fester. Although US Treasury Secretary Bessent publicly downplayed spillover risks, the French-German government bond spread still widened to a high of 153 basis points, with safe-haven funds accelerating into short-term German bunds and the Swiss franc. In addition, the US, Ukraine and Europe reached consensus on a peace framework, but the US government was thrown into disarray internally after Musk's "Starshield" system rate-limiting paralyzed Ukrainian military drones, further aggravating US-Ukraine differences over strikes on Russian oil refineries.
At the same time, the US dollar index weakened to the 101.7 area, a three-week low. Spot gold came under pressure late in New York trading, falling 0.45% to $4,122.38, while spot silver, buoyed by its industrial and catch-up attributes, extended its rebound, settling up 1.32% at $57.66. Gold's underlying support remains solid: Swiss gold exports rose 6% month-over-month in September to 165.2 tonnes, with exports to the UK surging 24% to 126.2 tonnes, a record high since 2012. World Gold Council data shows Q3 global physical gold ETF net inflows hit a record $31 billion (with the UK accounting for $7.5 billion). On the industrial metals front, Sonny McNess, a star aluminum trader formerly of JPMorgan and Mercuria, is aggressively going long October LME copper and short November copper through Hartree Partners, pushing the front-month spot premium to as much as $91.99 per tonne at one point.
Wall Street's "AI phobia" sees a turning point, but AI infrastructure expansion faces multiple challenges
The "AI capex phobia" that has hung over Wall Street over the past week saw a turning point. Goldman Sachs' risk appetite indicator turned negative for the first time since March, prompting Christian Mueller-Glissmann, the bank's London-based head of asset allocation, to tactically upgrade his three-month equity allocation to "overweight," noting that earnings support, light positioning and valuation pullbacks will fuel a year-end rally. At the same time, Wells Fargo's buy-sell sentiment indicator fell below -1 for the first time since June 2025, triggering a "buy" signal (historical data shows the S&P 500 has averaged a 6.5% gain over the following three months, with an 89% hit rate). Its chief strategist Ohsung Kwon said bluntly that the market has become overly pessimistic about AI financing and the Iran situation, and expects capital discipline to let hyperscale cloud providers replace chip stocks driven purely by cash burn as the new leaders, with the bullish case for AI infrastructure now pointing all the way to 2027.
Before the after-hours earnings bombs detonated, intraday traders were still voting with their feet, fleeing highly leveraged AI assets and rotating into defensive sectors such as healthcare (up 2.34%) and real estate (up 1.69%). Plante Moran chief investment officer Jim Baird said doubts about whether AI investment can be monetized are driving funds to rotate into small caps and healthcare stocks.
The panic was triggered by two factors: first, South Korea's rare profitable "new cloud" data center Elice plunged 32% on its first day of trading on October 20; second, The Wall Street Journal exposed a draft of Anthropic's IPO prospectus showing that although first-half revenue soared to $16.3 billion (with Q3 up another 45% quarter-over-quarter to $16.8 billion and adjusted profitability), its net loss reached a staggering $80.7 billion (including $72 billion in accounting charges from changes in the valuation of financing instruments), and future committed compute spending could reach an astonishing $750 billion at the high end. This directly led investors to slash their valuation expectations from $2 trillion to $1.5 trillion.
Moreover, the physical bottlenecks of AI expansion are becoming increasingly glaring. The US research group Center for Western Priorities revealed that there are already 35 data center and related applications on public lands across six western states (covering more than 24,000 acres, with one Utah project even proposing to use SMR nuclear power that has not yet been commercialized). Although the Trump administration views data center expansion as a national priority, public opposition to these projects is growing, with concerns centered on electricity demand, water consumption, wildlife impacts and the use of public lands.
Specific project moves and stock price swings:
Eli Lilly bucked the trend on Tuesday, surging 3.49% to another record high: The company announced that its Omvoh injection for pediatric ulcerative colitis patients achieved major success in late-stage clinical trials, and it plans to seek regulatory approval to expand the indication for this bowel disease therapy. Combined with intraday funds pulling out of tech stocks in search of a safe haven, this pushed the stock to a fresh all-time high.
The healthcare sector jumped 2.34% to lead the market: Weight-loss drug and biopharma themes broke out across the board, with Kailera Therapeutics soaring 12.77%, Viking Therapeutics up 6.63%, Moderna surging more than 6% to its highest since 2022 (up more than 720% year-to-date), Amgen up 3.29%, UnitedHealth up 3.04%, and Novo Nordisk up 2.42%.
SpaceX slipped 0.11%, then surged more than 8% in overnight trading: Third-quarter results crushed Wall Street across the board, with net profit of $4.4 billion far exceeding the expected $1.88 billion, and AI superintelligence (SI) business revenue soaring 830% to $7.56 billion while turning operating profit positive for the first time. On the earnings call, Musk confirmed that SpaceX and Tesla have each set up special committees to discuss a merger of the two giants, and declared that annual recurring revenue is sprinting toward $1 trillion and the compute payback period has shortened to six months, dispelling market doubts about whether infrastructure investment can be realized.
Super Micro Computer closed up 1.15%, then soared more than 15% after hours: The company's preliminary fiscal-quarter revenue estimate reached $18.5 billion–$19.5 billion (far exceeding the midpoint of its original guidance by 26.7% and analysts' expectations of $15.2 billion), with gross margin jumping to 12.0%–12.5%. Evercore ISI analyst Amit Daryanani noted that the combination of better-than-expected revenue and margins is striking, directly driving Dell Technologies up 6% in overnight trading, Hewlett Packard Enterprise up nearly 5%, and compute cloud firm CoreWeave up more than 4%.
Netflix closed down 1.66%, then plunged nearly 6% after hours: Fourth-quarter revenue growth guidance fell to 11.5% (slowing for a fourth consecutive quarter), net profit guidance missed expectations, and the company further cut its full-year advertising revenue forecast from $3 billion to $2.7 billion. Although third-quarter EPS beat expectations, management turmoil, layoff costs and the challenge of losing user time to YouTube sent funds fleeing.
CoreWeave & Nebius both surged more than 4% after hours: Boosted by Musk's massive GPU orders and the AI infrastructure boom, the US cloud services and compute leasing sector staged a dramatic comeback. CoreWeave, which had fallen as much as 6% intraday to a new post-IPO low, was supported by a Goldman Sachs rating upgrade to close up 1.65%, then soared more than 4% after hours along with the sector. Nebius rose 0.71% intraday and surged more than 4% after hours. Only data center operator IREN closed down 4.00% intraday.
The Philadelphia Semiconductor Index slipped 0.29%: Lam Research fell 3.21%, ARM fell 3.07%, ASML fell 0.99%, AMD fell 0.62%, Intel fell 0.37%, and Broadcom fell 0.07%.
The memory sector was mixed: Western Digital rose 3.44%, Seagate Technology rose 2.17%, SanDisk fell 0.42%, SK Hynix fell 2.16%, and Micron Technology fell 0.98% intraday (the company announced an investment in New York State's Indium Corporation to strengthen its high-purity mineral supply chain, but workers at its Taoyuan, Taiwan plant plan to strike this Thursday in solidarity with the Taichung union's push for profit sharing, which could severely disrupt chip production).
The optical communications sector broadly fell: AAOI fell 1.87%, Lumentum fell 1.44%, CRDO fell 0.75%, Coherent fell 0.09%, and only Marvell Technology rose 1.4%.
Tesla closed up 1.54% (extending gains of more than 1.5% in overnight trading): Ferrari's CEO publicly praised the new Roadster's design as showing bold innovation, and after hours Musk confirmed the formation of a special committee with SpaceX to explore a merger of the century, sending bullish sentiment into a frenzy. Watch for the earnings release after Wednesday's close.
Amazon edged up 0.07%: The company announced it will invest more than €16 billion in Germany in 2027 to expand AI and cloud infrastructure (full-year total capex is expected to reach $220 billion, with free cash flow already turning negative last quarter). However, internal emails revealed that AWS has activated an early-receipt process, taking delivery of $5 billion worth of Nvidia GB300 racks upfront (followed by $3 billion per month thereafter), but due to power shortages at some sites, the hardware can only be temporarily stored in transit warehouses awaiting deployment.
Nvidia closed down 0.29% (turning positive after hours, up more than 2.2%): Jensen Huang reached cooperation with the German government and Siemens at the Berlin summit on AI factories and startup investment, emphasizing that AI is a new tool to augment humans. After hours, Musk's announcement of a frenzied order to bring 200,000 GB300 units online each month and deploy 440,000 Vera Rubin units in Q2 next year directly injected a shot of adrenaline.
Microsoft slipped 0.31%: The company confirmed that Windows Server 2025 officially supports the fast machine recovery feature after installing the October security update.
Apple closed down 1.00%: Although the company, as part of its $600 billion "Made in America" plan, invested $100 million in Pennsylvania's Perryman to purchase recycled titanium and expanded its partnership with Qnity to produce variable-aperture film for the iPhone 18 Pro, the first foldable iPhone Duo going on sale this Friday is facing severe supply bottlenecks. Morgan Stanley noted that online delivery wait times have reached 14 weeks, the longest in a decade, while JPMorgan also cut its full-year shipment forecast from 10 million units to 8–9 million units due to capacity constraints.
Google fell 1.13%: Although its Waymo unit plans to use $5 billion in recently borrowed funds to double its autonomous vehicle fleet from 4,000 to 8,000 by the end of this year and expand to 20,000 by the end of next year, the stock was still dragged down intraday by selling pressure in the communication services sector.
Meta closed down 1.59%: As the first AI hyperscale giant to face the earnings gauntlet after Wednesday's close, funds chose to de-risk and front-run ahead of the results amid concerns over its massive capex guidance.
Other US stock moves: Braze soared 51.70% (Salesforce announced it will acquire the customer engagement platform Braze for $5.66 billion); Hasbro surged 11.2% to a one-year high (raising full-year revenue and digital gaming guidance); 3M rose 5.8% (announcing an expanded data center partnership with Amazon and raising its profit forecast); General Motors plunged 6.8% (warning of rising commodity costs and declining truck sales).
What to watch next:
October 21 (Wednesday)
17:00 Jensen Huang GTC keynote: European sovereign AI, inference demand, new architecture and partnership scale are the focus; the market needs concrete orders, not just long-term vision.
The World Intelligent Connected Vehicles Conference opens; the China-Europe Investment, Trade and Technology Cooperation Fair runs through the 23rd: watch for autonomous driving, vehicle-road-cloud standards and cross-border industrial cooperation.
Bessent and Druckenmiller attend the JPMorgan–Robinhood investor conference: the event is closed to media; if public information emerges, watch for views on fiscal financing, interest rates and market risk.
US earnings: IBM and AT&T before the open; Meta, Tesla, Lam Research and Texas Instruments after the close.
October 22 (Thursday)
Micron Taiwan Taoyuan plant strike and second round of negotiations with the Taichung union: Workers at Micron's Taoyuan plant are set to strike on Thursday in solidarity with the Taichung union's push for profit sharing. If negotiations break down and the strike is prolonged, it could directly cut off critical global DRAM and HBM chip production capacity, triggering sharp swings in memory chip prices and related stock prices.
04:30 Meta earnings call; 05:30 Tesla Q&A livestream: For Meta, the key is whether AI spending can be covered by advertising growth, with the market expecting revenue of $63.29 billion, capex of $40.97 billion and negative free cash flow of $9.14 billion; for Tesla, the key is how deliveries of more than 486,000 vehicles and 13.7 GWh of energy storage deployments translate into profit.
Bank of Korea rate decision: A pause is expected after consecutive hikes; if it tightens further, the won may find support, but chip stocks and companies with large financing needs would come under pressure.
US 20-year Treasury auction: The key is the strength of demand and whether the final yield comes in higher than expected, testing whether this round of the Treasury rally can continue and feeding through to gold and tech stocks.
Earnings: Nokia, Spotify, American Airlines, Procter & Gamble; after the close, watch Bloom Energy, Western Digital and Newmont.
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