Wall Street Bets on Silicon and Soft Landings

Wall Street, it seems, only has eyes for artificial intelligence and interest-rate cuts. Futures on major U.S. stock indexes were up, modestly but confidently, even as the federal government lurched into the sixth day of a shutdown. Markets, it seems, have chosen to look past Washington's dysfunction and instead fixate on the promise of AI and the possibility of cheaper money. It's a combination that, for investors, is proving almost as intoxicating as a bull market in the late 1990s, minus the dial-up tones.

The new rallying cry isn't just "AI will change everything," but rather "AI will change everything, and we actually have the money to build it." The infrastructure boom - data centers, chips, and enough cooling systems to rival Antarctica - is being financed by corporate cash flows, not wild-eyed venture capitalists or day traders with margin accounts.

And Wall Street has noticed. AMD's blockbuster announcement that it will supply AI chips to OpenAI in a deal worth tens of billions dollars sent its stock soaring more than 23% in premarket trading. The deal gives OpenAI an option to buy up to 10% of AMD for one cent per share. If that sounds extraordinary, that's because it is. The arrangement doesn't just crown AMD as a serious rival to Nvidia, it suggests OpenAI is slowly building its own silicon empire, one GPU at a time.

While Wall Street feasts on chip news, Washington is locked in what can only be described as a high-stakes staring contest. The government shutdown has frozen $1.7 trillion in federal operations, delayed crucial economic data, and, if unresolved by mid-October, could leave 1.3 million military personnel unpaid. President Trump has chosen to apply pressure with layoffs and, curiously, deepfake videos: a new, if dubious, tool of governance. Indeed, Trump posted an AI-generated deepfake video on his Truth Social account targeting top Democratic leaders, Senate Minority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries. The clip portrays the two men as if addressing reporters after a meeting, but the audio is entirely fabricated. In it, a synthetic Schumer declares that Democrats "have no voters anymore, because of our woke, trans bullshit." Not exactly subtle...

For the Federal Reserve, this political gridlock has a practical consequence: it clouds the view. With the nonfarm payrolls report delayed, policymakers will have to rely on alternative data and corporate earnings to gauge the economy's pulse ahead of their next meeting. Yet investors are undeterred. S&P 500 futures climbed 0.3%, Nasdaq futures rose 0.8%. Even Bitcoin joined the party, inching toward all-time highs. 

This persistent optimism might seem irrational: shutdowns, data blackouts, and political brinkmanship aren't usually market catnip. But markets, at their core, are forward-looking machines. They're betting that AI will keep reshaping industries, that the Fed will deliver rate cuts to cushion any economic slowdown, and that Congress, eventually, will remember to keep the lights on.

The third-quarter earnings season, starting next week, will be the real test. By the end of October, nearly three-quarters of the market's capitalization will have reported results. If corporate America delivers strong earnings and confident forecasts, this AI-fueled rally might just have legs. If not, all this optimism could fade faster than a New Year's resolution on January 3rd.

In Asia, Sanae Takaichi - remember that name because she is likely to be Japan's next prime minister - has been elected leader of the ruling party, which should guarantee her the top job in government. She would be the first woman to hold this position in Japan. Her likely arrival in power sent Japanese stock markets soaring this morning, with the Nikkei 225 gaining more than 5% during trading and setting a new record for the index. Takaichi is known to be in favor of accommodative monetary policy and budgetary spending. This helps to rule out the prospect of further rate hikes in Japan, reinforcing the feeling of a stimulus plan through public spending and causing the yen to fall. Equity investors are buying into this. The bond market, already concerned about the size of the country's debt, is likely to be a killjoy. The sharp rise in the Tokyo Stock Exchange has enabled regional indices to reach new highs. In Europe, markets are mixed, with the Stoxx Europe 600 inching up 0.1%. The CAC 40 slid sharply after France’s prime minister resigned only 26 days into his tenure, rattling political and market confidence alike.

Today's economic highlights:

On today's agenda: the unemployment rate in Switzerland; retail orders in the eurozone. See the full calendar here.

• Dollar index: 98,250
• Gold: $3,927
• Crude Oil (BRENT): $65.19 (WTI) $61.49
• United States 10 years: 4.16%
• BITCOIN: $124,560

In corporate news:

• Talen Energy launched a $1.2 billion term loan and expanded credit facilities to fund the acquisition of two natural gas power plants in Pennsylvania and Ohio.
• OneMedNet partnered with Palantir Technologies to power its AI-driven healthcare data platform, boosting shares of OneMedNet by over 46% premarket.
• AMD signed a multi-year deal to supply AI chips to OpenAI, potentially generating over $100 billion in revenue over four years and offering OpenAI the option to acquire up to a 10% stake.
• Verizon appointed former PayPal CEO Dan Schulman as its new chief executive, replacing Hans Vestberg effective immediately.
• Collective Mining announced Agnico Eagle Mines will exercise participation rights in a public offering, increasing its stake to 14.64%.
• Ross Stores will open a new store in Rexburg, expected to create 55–60 jobs.
• Maze Therapeutics named former Incyte CEO Herve Hoppenot as its new board chairman.
• Tradeweb Markets reported a 10% year-over-year increase in average daily volume for September, totaling $2.9 trillion.
• Gilead Sciences settled patent litigation with Lupin, Cipla, and Laurus Labs, delaying generic competition for Biktarvy until April 2036.
• Tesla teased a new vehicle launch event on October 7, heightening speculation about a lower-cost EV model.
• Blackstone and Lunate formed a $5 billion platform to invest in logistics assets across the Gulf Cooperation Council region.
• Mosaic completed the $111 million sale of its phosphate mining unit in Brazil, expecting to record an $80–$90 million gain in Q4.
• Merck began three new phase 2 trials for its experimental therapy tulisokibart in inflammatory diseases, expanding its testing to six conditions.
• Fifth Third Bancorp and Comerica agreed to merge in a $10.9 billion all-stock deal, creating the 9th largest U.S. bank by assets.
• Ares Management acquired a 49% stake in a U.S. renewables portfolio from EDP Renovaveis, valuing the assets at $2.9 billion.
• Tesla Insurance faces possible fines and license suspension in California over alleged mishandling of claims and consumer violations.
• Palantir and Anduril's battlefield communications system for the U.S. Army was flagged as high risk due to major security flaws, though both firms claim issues were mitigated.
• Boeing plans to boost 737 Max production to 42 jets per month starting in October, aiming for 53 per month by the end of 2026, pending FAA approval.
• TransDigm completed its acquisition of Simmonds Precision Products from RTX Corporation, further expanding its aerospace portfolio.
• Freeport-McMoRan confirmed that five workers previously missing were found deceased following a September mud rush at its Indonesian Grasberg mine, which remains shut for investigation.
• Qualtrics will acquire healthcare tech firm Press Ganey in a $6.75 billion deal to merge AI analytics with patient experience services.
• Omnicom Group signed a marketing partnership with Dubai's Shamal Holding, expanding its presence in the Middle East's leisure and hospitality sector.
• Hiscox completed the first $137.5 million tranche of its $275 million share buyback program, with the second tranche starting immediately.

Analyst Recommendations:

• Affirm Holdings, Inc.: Rothschild & Co Redburn upgrades to buy from neutral with a price target raised from USD 74 to USD 101.
• Emerson Electric Co.: Wells Fargo downgrades to market weight from overweight and reduces the target price from USD 150 to USD 140.
• Lennox International Inc.: Wells Fargo upgrades to market weight from underweight and reduces the target price from USD 675 to USD 575.
• Micron Technology, Inc.: Morgan Stanley upgrades to overweight from market weight with a price target raised from USD 160 to USD 220.
• Nike, Inc.: Baptista Research upgrades to outperform from hold and raises the target price from USD 69.30 to USD 83.20.
• Stellantis N.v.: Mediobanca upgrades to neutral from underperform with a price target raised from EUR 7.70 to EUR 9.70.
• Tpg Inc.: JP Morgan upgrades to overweight from neutral with a price target raised from USD 65 to USD 78.
• Microsoft Corporation: Griffin Securities maintains its buy recommendation and raises the target price from USD 485 to USD 625.
• Newmont Corporation: Jefferies maintains its buy recommendation and raises the target price from USD 73 to USD 107.
• Unity Software Inc.: CICC maintains its outperform recommendation and raises the target price from USD 36 to USD 50.