Key takeaway:
The key today is to watch whether AI expansion can translate into revenue and cash flow, and whether falling oil prices can continue to ease inflation and pressure on corporate costs.
【Today's Key Themes】
First key theme: AI investment and returns go hand in hand. Large computing-power expenditures by Anthropic and SpaceX are reinforcing infrastructure demand, while also heightening market attention to financing costs, cash flow, and customer concentration.
Second key theme: Japanese and South Korean chip stocks are gaining ground. Growth in South Korean semiconductor exports is aligning with gains among leading memory-chip makers. Related A-share industry chains are worth watching, with a focus on verifying orders and earnings delivery.
Third theme: Oil prices retreat, but energy pressures remain. U.S.-Iran talks, passage through the Strait of Hormuz, reserve releases and changes in U.S. inventories are all influencing oil prices, while industries such as aviation continue to face high fuel costs.
Fourth theme: The dollar weakens, while rate expectations remain hawkish. The dollar’s retreat alongside the possibility of Federal Reserve rate hikes, as well as inflation concerns in the UK and Australia, indicate that global financing conditions remain constrained.
Fifth theme: Focus domestically on liquidity rollover and policy implementation. Overnight reverse repos, maturing funds and changes in margin financing balances affect short-term liquidity, while policies on data as a factor of production, industrial AI and specialized and sophisticated SMEs provide industry signals to watch.
【U.S. Equities】
U.S. stocks ended mixed on Tuesday. The Dow Jones Industrial Average rose 1.02% to 52,496.11; the S&P 500 rose 0.29% to 7,712.65; and the Nasdaq Composite fell 0.02% to 26,424.82.
Among individual stocks, Western Digital rose 3%, Apple fell 1% and General Motors fell 6.8%.
Chinese stocks listed in the U.S. generally closed higher. The Nasdaq Golden Dragon China Index rose 0.69%, and XPeng gained more than 7%. Hang Seng Index futures rose 0.51% in overnight trading to 24,001.
After-hours trading was driven by earnings and corporate news. SpaceX reported third-quarter revenue of $14.58 billion and net income of $4.4 billion, and its shares rose as much as about 3% after hours. SpaceX and Tesla have each formed independent special committees of their boards to evaluate a potential merger. No deal has been finalized, and any transaction would remain subject to conditions including shareholder approval.
Nasdaq futures rose as much as 1% early Wednesday.
Netflix reported third-quarter revenue of $12.87 billion and free cash flow of $2.88 billion, below the market forecast of $3.22 billion. Its fourth-quarter guidance for revenue of $13.44 billion and operating income of $3.5 billion was also below market expectations, and its shares fell as much as 7% after hours.
Energy costs continue to weigh on corporate earnings. United Airlines forecast fourth-quarter adjusted earnings per share of $0.50 to $1.50, below the market estimate of $1.88. Third-quarter fuel expenses rose 61.6% year over year to $4.84 billion.
【Macro】
The U.S. Dollar Index fell 0.27% on Tuesday, closing at 101.701 in New York. The euro rose to 1.1237 against the dollar, the pound rose to 1.3383, and the dollar fell to 158.20 yen.
U.S. rate expectations remain hawkish. As of early morning, CME FedWatch showed an 83.9% probability that rates would remain unchanged in October and a 16.1% probability of a cumulative 25-basis-point hike. By December, the probability of a cumulative 25-basis-point hike was 76.1%, while the probability of a cumulative 50-basis-point hike was 14.2%.
European bond yields retreated, with France’s 10-year government bond yield falling 6 basis points to 4.866%. U.S. Treasury Secretary Bessent expects volatility in the French bond market to have no spillover effects and said some safe-haven funds are flowing into U.S. Treasuries.
The six-week U.S. Treasury bill auction had a high rate of 3.975%, while the bid-to-cover ratio rose from 2.58 to 2.74.
Inflationary pressures continue to constrain monetary policy. Bank of England Monetary Policy Committee member Greene said the decline in wage inflation has stalled and that wage growth needs to slow further to meet the inflation target. The Reserve Bank of Australia deputy governor said restrictive policy is weighing on the economy, but the inflation outlook has worsened compared with previous forecasts.
Trade talks are making uneven progress. The U.S. said a trade deal with India is relatively close, while U.S.-Mexico talks have reportedly stalled over steel and aluminum tariffs, with major progress potentially delayed until after the U.S. midterm elections.
【AI and Memory Supply Chain】
Demand for AI infrastructure continues to expand. Reports say AWS is expected to receive NVIDIA GB300 racks worth $5 billion. NVIDIA is in talks to invest hundreds of millions of dollars in Australian AI cloud provider Firmus, though discussions are ongoing.
Anthropic’s IPO filing disclosed first-half revenue of $16.3 billion, compared with $1.1 billion in the same period last year, and a net loss of $80.7 billion. About $72 billion of that loss came from accounting expenses related to fair-value changes in financing instruments such as convertible notes.
Spending on computing power and infrastructure in the first half approached $9 billion, with about 20% of revenue coming from two customers.
Anthropic’s future infrastructure spending commitments have exceeded $600 billion and could reach $750 billion if agreements still under negotiation are included. As demand for computing power expands, financing costs, customer concentration and the ability to convert revenue projections into realized revenue are important constraints on valuation.
SpaceX’s AI business generated $7.56 billion in third-quarter revenue, while AI capital expenditure was $16.44 billion. The company expects total capital expenditure in the fourth quarter to reach $35 billion to $40 billion.
Musk said the main bottlenecks to AI development are increasingly power, cooling and infrastructure, and added that the company is quite confident it will bring 10 gigawatts of computing capacity online by 2027.
Areas to watch in A-shares include memory, servers, data center power supply and distribution, liquid cooling and semiconductor equipment. Key metrics include how orders, deliveries, capital expenditure and cash flow align.
【Technology Industry】
DeepSeek announced the full open-source release of its internal inference framework, DeepInfer. AMD and Intel are working together to simplify AI development on x86 CPUs and have agreed to make oneDNN the default open-source library for x86 acceleration in PyTorch.
Enterprise AI financing remains active. Fireworks AI is seeking to raise funds at a valuation of $30 billion to $40 billion, with talks still at an early stage. The company previously disclosed that its annualized revenue exceeded $1 billion in July and that it processed more than 40 trillion tokens per day, 95% of them using models customized to meet customer needs.
China’s first space computing power marketplace, the Space Computing Power Trading Platform, has launched in beta. It brings together resources including space computing power, datasets, AI models and token services, and is exploring ways to connect supply with demand.
In commercial spaceflight and chip manufacturing, SpaceX plans to attempt the simultaneous recovery of its booster and spacecraft during Starship’s 15th test flight next month.
Elon Musk said ASML and other suppliers are accelerating equipment deliveries for the Terafab chip project, which aims to begin mass chip production in the third or fourth quarter of 2028.
The United States announced a $1.5 billion investment in semiconductor chip production in North Carolina. Qualcomm is reportedly planning performance-based global layoffs following its annual review, with adjustments to take into account business priorities, organizational needs and skills mix.
【Crude Oil】
International oil prices closed lower on Tuesday. Light sweet crude futures for November delivery in New York fell 1.80% to $101.79 per barrel; Brent crude futures for December delivery fell 0.69% to $108.79 per barrel. The domestic SC crude oil front-month contract fell 4.47% in overnight trading to 695 yuan per barrel.
On supply adjustments, the International Energy Agency said it would consider further releases from emergency oil reserves if needed. The United States is pushing refiners to expand capacity and working with Europe to secure the release of an additional 50 million barrels of diesel. Goldman Sachs expects refined product exports from the Persian Gulf to be just 40% of the 2025 average.
For the week ended October 16, U.S. API crude inventories fell by 4.931 million barrels, more than the expected decline of 1.107 million barrels. Gasoline inventories fell by 1.954 million barrels and distillate inventories by 2.577 million barrels, both declines exceeding expectations.
Crude inventories at Cushing rose by 936,000 barrels. The EIA inventory data due this evening will be a fresh point of focus.
【Precious Metals】
Domestic gold and silver futures diverged in overnight trading. The most-active Shanghai gold contract fell 0.31% to 890 yuan per gram, while the most-active Shanghai silver contract rose 1.54% to 14,075 yuan per kilogram.
Gold T+D on the Shanghai Gold Exchange fell 0.15% to 888.5 yuan per gram, while silver T+D rose 0.98% to 13,963 yuan per kilogram.
Holdings in precious metals ETFs increased across the board. SPDR Gold Trust’s gold holdings rose by 1.711 tonnes to 1,060.183 tonnes; iShares Silver Trust’s silver holdings rose by 26.68 tonnes to 15,505.35 tonnes.
【Domestic Market Signals】
On liquidity, the central bank will conduct overnight reverse repo operations from October 21 to November 2, while 56 billion yuan of seven-day reverse repos mature today. The scale of the overnight operations and how they offset maturing funds will be worth watching.
As of October 20, the combined margin financing balance on the Shanghai and Shenzhen stock exchanges stood at 2.443356 trillion yuan, down 2.14 billion yuan from the previous trading day. The Shanghai Stock Exchange balance was 1.257978 trillion yuan and the Shenzhen Stock Exchange balance was 1.185378 trillion yuan, each down 1.07 billion yuan.
On policy and industry, the National Data Group has been established. The Ministry of Industry and Information Technology is drafting policy measures for next-generation intelligent manufacturing to promote deeper integration of AI and manufacturing. During the 15th Five-Year Plan period, China will establish around 30 specialized and sophisticated SME empowerment centers, creating a service network to support innovation among small and medium-sized enterprises.
CATL’s net profit rose 31.6% year over year in the first three quarters.
In commodity markets, domestic energy and chemical products broadly fell in overnight trading. Fuel oil dropped more than 5%, very-low-sulfur fuel oil fell nearly 4%, LPG and paraxylene declined more than 3%, and methanol and PTA fell nearly 3%. Coastal MTO plants have all shut down. Changes in supply and demand for methanol and its downstream chain warrant monitoring.
In the ferrous metals supply chain, iron ore inventories at seven major ports in Australia and Brazil fell by 732,000 tonnes from the previous period to 11.852 million tonnes. In Shanxi, 220 coal mines have completed rectification and resumed operations.
Some coking plants have proposed an initial price increase of 50 to 55 yuan per tonne, scheduled to take effect on the 21st. Steel mills have yet to respond, while coking plants in some regions have voluntarily cut production by 30% to 40%.
In agricultural products, U.S. private exporters reported sales of 612,000 tonnes of soybeans to China, all for delivery in the 2026/2027 marketing year. Malaysian palm oil exports rose 58.51% from October 1 to 20 compared with the same period last month. The Dalian Commodity Exchange cautioned that hog prices have been highly volatile recently and that risk prevention should be strengthened.
Changes to eligible stocks for Southbound Stock Connect take effect today: Lygend Resources is being added, while Vico International Holdings - Old is being removed. Areas to watch in A-shares include data as a factor of production, industrial AI, intelligent manufacturing, semiconductor equipment and power batteries; assessments should take into account business data and policy implementation.
【Key Events】
14:00 UK September CPI month over month, public sector net borrowing and RPI month over month.
17:00 NVIDIA CEO Jensen Huang delivers a speech.
21:00 Bank of England Governor Bailey delivers a speech.
22:30 U.S. EIA crude oil inventories, Cushing crude inventories and Strategic Petroleum Reserve inventories for the week ended October 16.
【Risk Disclaimer】
There are still conflicting reports on U.S.-Iran talks and maritime security, and oil prices and safe-haven assets may move sharply in response to news. Changes in API inventories still need to be confirmed by EIA data. Large investments, financing support and potential mergers in the AI industry all carry execution and governance risks; company forecasts and negotiating targets do not guarantee final outcomes.
After-hours trading, stock index futures and gains in the early sessions in Japan and South Korea reflect conditions at the respective times. A-share-related content is for monitoring purposes only and does not constitute investment advice.
For research and educational purposes only; this does not constitute investment advice.