AI Fuels October Gains in U.S. Stocks

Short sellers betting against the S&P 500 last month faced an unexpected surge. The index concluded October with a 2.3% increase, defying historical anxieties associated with “Octoberphobia” – a term rooted in the market crashes of 1929 and 1987.

The Nasdaq Composite outperformed the S&P 500, climbing a notable 4.7%. This surge hints at the underlying driver of the market’s positive trajectory: the robust performance of the technology sector, particularly fueled by advancements in artificial intelligence.

Friday’s trading saw Amazon shares surge 9.6% following a strong earnings report highlighting significant growth in its cloud-computing division. CEO Andy Jassy specifically cited “strong demand in AI and core infrastructure” as a key catalyst. This news rippled through the market, boosting other AI-related stocks like Palantir and Oracle. This performance underscores the growing market validation of AI’s transformative potential across industries.

The ascent of AI in the market isn’t an isolated event. Nvidia, a bellwether for the AI sector, achieved a significant milestone in October, briefly reaching a staggering $5 trillion valuation. CEO Jensen Huang characterized AI as a “virtuous cycle,” where increased adoption leads to further investment, which in turn drives innovation and enhances AI capabilities, fostering even greater adoption. This self-reinforcing dynamic presents a compelling case for sustained growth in the AI market.

Recent earnings disclosures from major tech companies reveal a significant increase in capital expenditure, with a substantial portion earmarked for AI infrastructure development. This investment surge signals a long-term commitment to AI and reflects the strategic importance these companies place on gaining a competitive edge in this rapidly evolving landscape. The sheer scale of this investment suggests that AI is not simply a passing trend but a fundamental shift in the technological landscape, driving innovation across various sectors.

The current enthusiasm surrounding AI appears to be more than just fleeting hype. Instead, it resembles a sustained energy boost fueled by long-term growth potential, rather than a temporary surge followed by a sharp decline.

China’s factory activity slows down in October. The RatingDog China General Manufacturing PMI, compiled by S&P Global, came in at 50.6 for the month, dipping from the six-month high of 51.2 in September. While still indicating expansion, the slowdown suggests potential headwinds for the Chinese economy, warranting close monitoring by investors.

Baidu’s weekly robotaxi rides hit 250,000. According to Apollo Go, Baidu’s robotaxi unit, the firm surpassed that figure as of Oct. 31. This milestone places Baidu in direct competition with Waymo, signaling the intensifying race for dominance in the autonomous vehicle market. The scalability and profitability of robotaxi services remain key challenges for both companies.

Berkshire Hathaway operating profit rebounds. Year on year, that figure surged 34% to $13.485 billion in the third quarter. Warren Buffett’s conglomerate now holds $381.6 billion in cash, the highest on record – but it isn’t looking at stock buybacks yet. This substantial cash reserve provides Berkshire Hathaway with significant flexibility for strategic investments and acquisitions in the future, reflecting Buffett’s cautious approach to capital allocation.

U.S. markets ended Friday higher. On Sunday night stateside, futures tied to major U.S. indexes were little changed. Asia-Pacific markets rose Monday. Japan’s Nikkei 225 and South Korea’s Kospi were up more than 2%, as of 2 p.m. Singapore time (1 a.m. ET).

[PRO] Stocks enter November on a high. The S&P 500 is beginning November more than 16% up for the year. This week, investors should still keep an eye out for a Supreme Court case on Trump tariffs and earnings from firms like Advanced Micro Devices and Palantir.