US stock outlook | Futures of the three major stock indexes had mixed ups and downs, and oil broke through $110, and Nvidia received more than $35 billion GPU orders from Byte, Ali, and Tencent

Pre-market market trends

1. Before the US stock market on October 20 (Tuesday), futures for the three major US stock indexes had mixed ups and downs. As of press release, Dow futures were up 0.05%, S&P 500 futures were down 0.21%, and NASDAQ futures were down 0.66%.

2. As of press release, the German DAX index fell 0.77%, the UK FTSE 100 index fell 0.59%, the French CAC40 index fell 0.84%, and the European Stoxx 50 index fell 1.02%.

3. As of press release, WTI crude oil rose 2.46% to $100.96 per barrel. Brent crude rose 1.86% to $111.59 per barrel.

Market news

OpenAI is reported to have accelerated financing of 30 billion US dollars to lock in capital before Anthropic goes public. According to people familiar with the matter, OpenAI is stepping up investment promises from investors, hoping to complete the financing before rival Anthropic is expected to go public in mid-November. This round of funding is progressing at an unusually rapid pace, and it is likely that OpenAI's valuation will exceed $1.4 trillion. In addition, OpenAI also hopes to attract more investment by leveraging the revenue growth achieved after the recent launch of the new model. A source familiar with the matter revealed that SoftBank, MGX, which is headquartered in Abu Dhabi, and other existing investors from OpenAI are currently in negotiations to participate in this round of financing of about 30 billion US dollars.

IEA Director Birol: If necessary, we will consider releasing more strategic reserves of crude oil. International Energy Agency Director Birol said on Tuesday that the schedule for the organization's member states to release 20 million barrels of diesel from emergency reserves depends on each country's specific situation and oil market conditions. The International Energy Agency decided last week to expedite the release of oil not yet invested in the record-scale emergency reserve release plan promised in March, including more than 20 million barrels of diesel, to increase supply as soon as possible and mitigate surging prices. Birol said, “The exact amount of release and when it will be released depends on each country's own situation, as well as on winter market conditions.”

Oil prices continued to rise this week, and the risk premium was supported by the Middle East conflict and the impasse in the US-Iran negotiations. Crude oil prices continued to rise this week, and the market quickly digested the brief correction caused by Trump's exemption from sanctions against Russia. The main driving factor is still the situation in the Middle East. Negotiations between the US and Iran are at an impasse, and the ongoing armed conflict between Saudi Arabia and the Houthis has kept the oil price risk premium high. The Houthis said yesterday that they have launched multiple attacks on Saudi energy facilities, airports, and military targets. Recently, the conflict has clearly escalated and has become one of the main factors driving up oil prices. Regarding the US-Iran negotiations, Arabian TV reported yesterday that it is expected to announce a breakthrough in the negotiations this week.

British Ministry of Defense: The Royal Air Force will be dispatched to help protect Saudi cities and the country's critical infrastructure from air attacks. The British Ministry of Defense announced that it will dispatch Royal Air Force “Typhoon” fighter jets to carry out defensive air supremacy missions to help protect Saudi cities and the country's critical infrastructure from air attacks. The British Ministry of Defense said that these fighter jets will carry out defensive missions and will not carry out offensive attacks against the Houthis.

Investors are increasing AI-related credit default swap transactions to hedge against industry debt risks. According to reports, investors are racing to buy credit default swaps (CDS) to protect their respective portfolios to prevent the AI boom from bursting. According to Morgan Stanley research data, in September, the average weekly transaction volume of CDS linked to bonds issued by Oracle (ORCL.US), SpaceX (SPCX.US), Alphabet (GOOGL.US), Amazon (AMZN.US), Meta (META.US), Broadcom (AVGO.US), and NVDA.US (NVDA.US) exceeded 9 billion US dollars, compared to less than 2 billion US dollars in July. According to institutional data, so far this year, the trading volume of the US corporate CDS index has exceeded the total amount for the whole of last year.

The most watched data center IPOs in Korea fell cold and plummeted 32% on the first day of listing. On Tuesday, South Korean artificial intelligence service company Elice Group's stock price plummeted 32% on the first day of listing. Currently, the market's investment sentiment in this industry has cooled down sharply, causing the listing plans of many companies to be blocked. Elice raised 2011 billion won (approximately US$150 million) in an initial public offering (IPO). The company provides AI cloud services and AI-based education and business software, and plans to use most of the capital raised from the IPO to launch portable modular data centers and related infrastructure. In a context where borrowing costs remain high due to high inflation, investors are increasingly questioning whether the huge amount of money invested in the AI field can bring returns in the short term.

Individual stock news

Byte, Ali (BABA.US), and Tencent (00700) ordered more than 3 million Nvidia RTX PRO 5500 video cards, and the total order amount exceeded 35 billion US dollars. According to reports, ByteDance, Alibaba, and Tencent have ordered more than 3 million Nvidia RTX PRO 5500 workstation video cards, with a total order amount of over US$35 billion, based on approximately US$11,400 each. The chip complies with US export control requirements to China, and is currently one of Nvidia's high-performance chips that Chinese buyers can still purchase.

General Motors (GM.US)'s international business profits plummeted 88%, spending $20 billion on repurchases. GM's third-quarter earnings report showed that the company's quarterly revenue was US$50.15 billion, up 2.9% year on year, higher than LSEG's agreed estimate of about US$48.7 billion; adjusted earnings per share were US$3.70, up 32.2% year on year, higher than the agreed forecast of US$3.63. Among them, adjusted profit before interest and tax from international business fell 87.7% year on year to 28 million US dollars, of which China's joint venture equity income fell 60.3% to 32 million US dollars; financial sector profit before tax fell 16.9% to 668 million US dollars. The adjustments related to the strategic restructuring of electric vehicles narrowed to US$238 million during the quarter, compared to US$1,592 million in the same period last year. The company also announced that the board of directors approved a multi-year repurchase authorization of 20 billion US dollars, accounting for about 28% of the current market value, and declared a quarterly dividend of $0.18 per share.

GE Aerospace (GE.US)'s Q3 revenue surpassed expectations by 16%, raising the guidelines for the eighth time in a row. GE Aerospace's third quarter showed revenue up 16% year over year to US$14.12 billion; adjusted revenue of US$13.29 billion was higher than LSEG IBES's agreed estimate of US$12.87 billion, up about 18% year over year. Adjusted earnings per share were $2.25, which was significantly higher than the forecast of $2.01, an increase of approximately 36% year over year. Under GAAP, earnings per share from continuing operations were $2.32 billion; net profit of US$2.8 billion, up 12% year over year; and operating profit of US$3 billion. In terms of full-year performance guidance, adjusted EPS guidance was raised to $8.00-8.10, and free cash flow guidance was raised to $91-9.4 billion. The company also raised its free cash flow and operating profit forecasts; adjusted revenue growth guidelines remained at around 19%-20%.

J.P. Morgan: The CoreWeave (CRWV.US) debt sell-off poses limited risk to global banks. J.P. Morgan Chase estimated on Tuesday that most banks worldwide have limited risk exposure to Coreweave. Previously, the cloud computing company's stock price and bonds fell sharply last week because investors were concerned about its debt financing problems. J.P. Morgan said that although the potential exposure of major US investment banks and Japan's Mitsubishi UFJ Financial Group CoreWeave may be between 1 billion and 3 billion US dollars, the exposure of most European and Asian participants is less than 500 million US dollars. Most of this is achieved through deferred withdrawal term loans, which are mainly held through special purpose entities, and funds will be released when the project reaches milestones. From the perspective of financing banks, J.P. Morgan believes that the bank has properly managed CoreWeave's risk exposure and has very sufficient guarantees.

Nvidia is reported to have successfully won an order for CPU chips from AI startup Modal. According to reports, Nvidia successfully won an order for central processing units (CPU) chips from the rapidly growing artificial intelligence startup Modal. Modal previously only used Intel and AMD chips, which initially indicates that Nvidia has made significant progress in entering this market dominated by the two giants.

Waymo, a subsidiary of Google, plans to expand the vehicle fleet to five times the original size with a $5 billion financing. According to reports, as Waymo expands its autonomous taxi business to more cities, the company plans to use a recent $5 billion loan to significantly expand the size of its autonomous vehicle fleet. According to people familiar with the matter, Waymo currently has about 4,000 cars, and plans to double the fleet to 8,000 vehicles by the end of this year, and further expand to 20,000 vehicles by the end of next year. The company said in a statement on its official website that the purpose of raising capital is to promote domestic and international business expansion in the US.

The US ban on advanced robots affects chip manufacturing, and Intel (INTC.US) applied for an exemption: there are no local alternatives for critical devices. According to reports, Intel has applied to the US Federal Communications Commission for an exemption from the recent ban on advanced robots made in foreign countries, saying that the company needs to continue using specific professional equipment essential to US semiconductor manufacturing. According to the application documents, Intel is concerned that its automated guided vehicle equipment may be affected by a complete ban on the import and sale of advanced foreign robotics technology. This type of equipment is mainly used to transport materials within semiconductor factories. Intel said that ensuring the continuous operation of these robots is “critical” to US national security. Currently, there are no proven replacement devices in the US that can meet Intel's strict requirements, and it will take years to replace existing equipment. Any disruption in operations would “have an immediate negative impact on Intel's semiconductor manufacturing capacity in the US.”

Amazon plans to invest 16 billion euros in Germany next year. According to reports, Amazon plans to invest about 16 billion euros (about 21 billion US dollars) in Germany next year. Amazon said the investment covered “employment, technology and infrastructure,” including “expansion of data centers and artificial intelligence infrastructure, high-speed satellite internet services provided through Amazon Leo, new logistics projects across the country, and a new round of large-scale production plans for Prime Video.” According to the company, it plans to invest about 4.8 billion euros (about 6.4 billion US dollars) to expand Amazon Cloud Services (AWS) cloud services and artificial intelligence infrastructure in Germany.

Key economic data and event forecasts

20:15 Beijing time: The US ADP employment week announced changes for the week ending October 3.

20:30 Beijing time: The initial monthly rate of construction permits in the US in September and the annualized monthly rate of new housing starts in the US in September.

22:00 Beijing time: Monthly rate of the US existing home contract sales index after the September seasonal adjustment.

04:30 Beijing time the next day: Changes in US API crude oil inventories for the week ending October 16.

Performance Forecast

Wednesday morning: SpaceX (SPCX.US), Netflix (NFLX.US), United Airlines (UAL.US)

Wednesday pre-market: AT&T (T.US), Abbott (ABT.US), Danaher (DHR.US)