AI Stocks Under Pressure as SoftBank Sells Nvidia; UK & US Face Economic Headwinds
Market Snapshot
- ▲ S&P 500: 6,846.61 (+0.21%)
- ▲ NASDAQ 100: 25,803 (+0.63%)
- ▼ FTSE 100: £9,898 (-0.11%)
- ▼ US 10-Year Treasury: 4.087% (-0.80%)
- ▼ Gold: $4,125.89 (-0.02%)
- ▲ Bitcoin: $104,824 (+1.73%)
- ▲ Ethereum: $3,529 (+3.30%)
Global Economic Headwinds Mount
The UK labour market is exhibiting clear signs of weakening, with the unemployment rate rising to 5.0% in the three months to September, its highest point since early 2021. Data revealing slowing wage growth and a second consecutive monthly loss of 32,000 payroll jobs has led traders to price in an over 80% probability of a Bank of England interest rate cut in December.
In the United States, the longest government shutdown in the nation's history has ended after 43 days. Economists estimate the shutdown, which froze approximately $21 billion in federal pay, trimmed 1.5 percentage points from quarterly GDP. A knock-on effect is that government agencies like the Bureau of Labor Statistics will need time to catch up, delaying the release of key economic data and leaving market watchers in suspense about the state of the job market.
Meanwhile, hopes that potential Federal Reserve rate cuts will reinvigorate US consumer spending may be misplaced. While wealthier consumers continue to spend, households most sensitive to borrowing costs are contending with slowing wage growth, depleted pandemic-era savings, and rising prices. With most household debt being fixed-rate, the benefits of lower interest rates are partially blocked, a strain reflected in rising delinquencies for credit cards and subprime auto loans.
AI Sector Faces Reality Check
Investor sentiment around the artificial intelligence sector is showing signs of strain. SoftBank announced it has sold its entire $5.83 billion stake in Nvidia, redirecting the proceeds to its investment in OpenAI. This coincides with growing caution in the market, as prominent investor Michael Burry, known for his bets against the 2008 housing market, warned that major AI firms are “understating depreciation” of their chips to “artificially boost earnings.” Burry has reportedly taken short positions against Palantir and Nvidia.
Adding to concerns, CoreWeave, a key data centre provider, cut its forecast, citing client frustration over delays and highlighting that demand for its AI cloud platform “far exceeds available capacity.” Microsoft's CEO has also noted that shortages of electricity and data centre capacity are becoming significant issues.
This caution contrasts sharply with an optimistic outlook from chipmakers. AMD projected annual revenue growth of over 35% for the next five years, driven by “insatiable” demand. Similarly, Nvidia has reportedly secured over $500 billion in chip orders through 2026, and supplier Foxconn struck a bullish tone in its latest earnings report.
Digital Assets See Institutional Moves and Regulatory Scrutiny
Adoption and Innovation
Major financial companies are deepening their integration of digital assets. JPMorgan Chase has launched its blockchain-based deposit token, JPM Coin (JPMD), for institutional clients, enabling near-instant, 24/7 settlements. In the retail sector, Square has activated Bitcoin payments for 4 million US merchants via the Lightning Network, with zero processing fees through 2027, and allows businesses to automatically convert a portion of daily sales into Bitcoin.
In other developments, Coinbase has launched a new token sales platform, offering retail investors early access to digital assets. In the decentralised finance (DeFi) space, a proposal to activate protocol fees for Uniswap's UNI token caused its price to surge, with a plan to return value to holders through a perpetual burn mechanism.
Regulation and Geopolitics
Regulatory frameworks for digital assets are taking shape globally. The Bank of England confirmed plans to introduce a “temporary” stablecoin holding limit of £20,000 for individuals. In the US, the Senate Agriculture Committee released a draft bill to define the CFTC's oversight of crypto spot markets, seen as a significant step toward clearer rules.
A regulatory conflict is emerging between the EU and US. Circle's USDC stablecoin faces a challenge, as the EU's MiCA framework requires 30% of reserves in EU banks, while the US GENIUS Act mandates 100% backing in US Treasuries. This could force Circle to issue separate tokens for each region, potentially fragmenting liquidity.
Geopolitical tensions have also entered the sector, with China accusing the US government of orchestrating the 2020 theft of over 127,000 Bitcoin, a claim Washington rejected.
Corporate Roundup
Berkshire Hathaway ($BRK-A): Warren Buffett has announced his retirement as CEO after 60 years. Greg Abel is set to take over leadership of the conglomerate.
Paramount ($PSKY): The media giant is accelerating its cost-cutting measures, now targeting $3 billion in savings through job cuts, subscription price hikes, and a mandatory five-day office work week.
Funko ($FNKO): The collectibles company is in financial distress, revealing $241 million in debt and expressing “substantial doubt” about its ability to continue operations.
Sony Group: The company raised its full-year earnings forecasts following a strong quarter, driven by the success of its 'Demon Slayer' anime film and strong PlayStation 5 sales.
On: The Swiss sportswear company reported better-than-expected earnings and raised its guidance, stating it would not need to offer Black Friday deals to drive demand.
Oura: The smart ring maker could see $2 billion in sales in 2026, though its CEO stated there is “no news on an IPO” for the company.
Luckin Coffee: The coffee chain's CEO indicated the company is exploring a potential relisting in the U.S. after it was delisted in 2020 following a fraud case.
Oklo: The nuclear power start-up reported a wider operating loss and has yet to generate revenue but is making progress on its planned fuel fabrication facility.
Healthcare Sector: Health insurers such as Centene and Molina Healthcare are under pressure from political uncertainty surrounding ACA subsidies, though analysts see selective opportunities in undervalued pharmaceutical and medtech companies.
UK Political Instability Deepens
Prime Minister Keir Starmer's government is facing a significant internal crisis amid public infighting and collapsing poll numbers. Health Secretary Wes Streeting publicly denied allegations that he was plotting to oust the prime minister, dismissing claims of a potential mass resignation of frontbenchers as “categorically untrue.” The episode has exposed deep divisions within the ruling Labour Party as its polling numbers have fallen, now trailing Reform UK, and Starmer’s personal approval rating has dropped to –45%, signalling severe government instability.
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