The headline of the week came from Nvidia and OpenAI. Nvidia announced a $100 billion investment into ChatGPT, with plans to supply chips while also taking equity in OpenAI.

This deal underscores the massive capital requirements of AI. OpenAI has already flagged the need for $500 billion to $1 trillion in future investments, with Oracle and SoftBank previously joining financing rounds. Still, questions linger about whether these astronomical sums will generate sustainable returns — reminiscent of the dot-com era’s “round-tripping.”

Reports from Bain and J.P. Morgan suggest that by 2030, AI-related companies may fall short of revenue targets by as much as $800 billion. Meanwhile, since November 2022, AI semiconductors alone have accounted for:

• 75% of S&P 500 returns
• 80% of earnings growth
• 90% of capital spending

Source: https://am.jpmorgan.com/us/en/asset-management/institutional/insights/market-insights/eye-on-the-market/the-blob-capital-china-chips-chicago-and-chilliwack/

The market is clearly betting big on AI — but not without risks.

Market Performance

• S&P 500, Nasdaq, Russell: Flattish week with less than 2% pullback from highs.
• India equities: Down ~3%.
• Dollar: Strong early in the week, reversed midweek.
• Crypto: Bitcoin slipped below 110k; Ethereum under 4,000. Still strong since early July.
• Commodities: Gold, WTI, and copper all up over 2%.

  

   

Sector highlights:

• Winners: Oil services, gold miners, utilities, semiconductors.
• Laggards: Airlines, online retail, homebuilders, consumer staples.

  

   

Rates, Macro & the Fed

• US 10-year yield: Climbed to 4.18%.
• Fed cuts: October cut remains priced at ~80–90% probability. December cut odds have fallen sharply after GDP revisions showed resilient US consumption.
• Volatility: VIX hovered around 15%. Some unusual buying of short-dated calls pushed implied volatility higher than realized.

The market is still trading on “good news is bad news” logic — stronger macro data reduces expectations for rate cuts, pressuring equities.

Technicals & Asset Watch

• S&P futures: Trend remains intact, though Russell 2000 shows a triple top.
• Oil (WTI): Strong at $66, supported by geopolitical tensions.
• Crypto: Pullback to July levels despite continued inflows.
• Dollar: Correlating closely with US 10-year yields.

  

  DXY (lhs) vs 10y Futues (rhs)

What’s Ahead

• Macro:
  • Case-Shiller housing data (Tuesday)
  • ISM Manufacturing & Services PMI (Friday)
  • Nonfarm Payrolls (Friday) – consensus: 50–60k new jobs

• Earnings: Nike (Tuesday)
• Other: JPMorgan “collar” roll on Tuesday may bring late-session volatility.

Markets are also bracing for noise around the potential US government shutdown, though history suggests limited market impact.

Final Thoughts

September has been resilient despite seasonal headwinds, with flows into equities still strong. Looking ahead, October–December historically bring positive seasonality for the S&P 500.

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