The United States (US) technology reporting season has so far followed a consistent pattern; companies have largely met or beaten their numbers while the market has sold off a good portion of them anyway. The reason is that investors are no longer paying for the quarter just ended but are instead pricing what each company intends to spend, and earn, over the next two years.

The NASDAQ 100 gained 2.2% this week on the strength of space exploration company SpaceX and information technology company Super Micro Computer, yet as at the time of writing its futures were 1.7% lower, with chip stocks leading the retreat after electric vehicle company Tesla, tech giant Meta, and semiconductor capital equipment company Lam Research, reported late on Wednesday, all with fundamentally strong results.

SpaceX still increasing its value, but questions around Tesla

The most consequential disclosure of the week came on a results call. SpaceX, in only its second quarter as a listed company, reported revenue of $14.58 billion, up 161% year-on-year, and net income of $4.4 billion against a loss a year earlier, while lifting fourth quarter capital expenditure (CAPEX) guidance (the forecast of its future financial performance) to between $35 billion and $40 billion to accelerate its compute build-out, the process of purchasing and scaling the hardware, facilities and power infrastructure needed to run large-scale data processing or artificial intelligence (AI) workloads. Asked about Tesla, CEO Elon Musk confirmed that the boards of both companies have formed special committees to examine a merger between SpaceX and Tesla, which at current valuations would be the largest corporate union on record, and on the news, SpaceX closed 7.8% higher.

What exists today is a formal process rather than a transaction, since Musk himself cautioned against treating the outcome as certain, approval would require a majority of all outstanding Tesla shares, and the Tesla proxy filed on Monday contains no merger proposal. United Kingdom (UK) banking company Barclays frames the rationale as being around vertically integrating the AI ambitions of both groups, while Tesla’s independent shareholders will weigh a governance question in which Musk holds roughly 45% of SpaceX’s equity but around 82% of its voting power, raising questions over how much influence Musk will have over the merged company.

Tesla’s own results beat on earnings, with adjusted earnings per share of $0.48/share against $0.45/share expected on revenue of $28.05 billion that was flat year-on-year, and automotive gross margin excluding regulatory credits recovered to 18.1%. Free cash flow of $1.53 billion against expectations of an outflow of about $4.5 billion looked like a clear positive surprise, but part of it came from lower spending, and management also cut its 2026 CAPEX plan to about $20 billion, which sits awkwardly with the long-term investment in robotics and autonomy that underpins the share price. The shares, having risen 3.4% during the session on the merger headlines, fell roughly 3% after hours, as operating income declined 56% year-on-year to $718 million and Tesla pushed out its timelines for unsupervised self-driving, Robotaxi revenue and Optimus volumes.

Meta struggles to convince investors

Meta’s revenue rose 26% to $64.6 billion, ahead of the roughly $63.4 billion expected, as average price per digital advert climbed 14%, and the company narrowed full-year CAPEX to between $135 billion and $145 billion, raising the floor from $130 billion, while free cash flow turned negative at $2.12 billion on third quarter CAPEX of $34.9 billion. Operating income fell 37% as a $9.89 billion legal charge, stemming from a legal agreement to resolve United States (US) nationwide litigation concerning teen mental health and social media addiction, and higher infrastructure costs absorbed the revenue gain. The shares fell after an after-hours gain of more than 6% as attention turned to how the AI build-out will be funded and the debt market sent a similar signal on Thursday, with Meta’s five-year credit default swaps rising as much as 8.9 basis points to around 119 basis points, their highest level since the contracts began trading, but pointing to caution rather than stress. In this instance the direction the default swaps are moving in matters more than the number, because a strong set of results was not enough to push the cost of protection against a default lower.

Tech peers also lose

The semiconductor results showed where the market’s sensitivity lies. Lam Research reported record revenue of $8.22 billion, up 54% year-on-year, yet the shares fell about 7% after hours because its fourth quarter guidance was capped by its own supply constraints and falling revenue in China, whereas semiconductor company Texas Instruments guided above consensus and traded higher.

A Bloomberg report this week on how Wall Street banks are encountering soaring AI costs helps explain why each new CAPEX figure is met with suspicion. These banks’ chief financial officers who funded early adoption with few constraints are now restricting staff access to the most powerful models, testing smaller ones and considering alternative providers including Chinese models, because agentic workloads consume unpredictable amounts of computing power, and benchmarking firm Evident found that only 12 of the 50 largest global banks have publicly attributed returns to AI. Hyperscaler spending on the scale Meta and SpaceX are guiding to earns its return only if corporate customers keep paying rising compute bills, so a shift towards cost discipline among those customers would pressure pricing at the moment new capacity arrives.

Microsoft and Alphabet both report on 28 October, the same day as the US Federal Reserve’s rate decision, with Amazon following on 29 October and Apple on 2 November. Each will be judged on the two measures applied to Tesla and Meta, namely the CAPEX guide and the evidence that customers are paying for what is being built, and the experience of this week suggests that a higher return on the quarter will buy very little unless revenue is visibly keeping pace with the spending.

Market moves

Bonds

The US 10-year Treasury yield fell 17 basis points to 4.96% on Thursday, its sharpest one-day decline since 2023 and its lowest level in close to a month, as the equity rout drove an investor flight to quality, reinforced by positioning ahead of next week’s Federal Open Market Committee (FOMC) decision on 28 October. On the week the yield is down roughly 15 to 20 basis points, having traded above 5% as recently as midweek before breaking back below it. The question for the sessions ahead is whether safe-haven demand holds once the tech panic settles, or whether the inflationary oil spike reasserts upward pressure on long-term bonds.

Germany’s 10-year Bund has been trading around 3.4%; little changed on the week and off the 17-year highs seen earlier in the month. The structural backdrop remains hawkish and markets still price one further European Central Bank (ECB) hike as a near-certainty, with about an 80% chance of a second one by year-end, which caps how far core European yields can rally even on global safe-haven demand.

Gilts remain the pressure point in the UK, with the 10-year in the 5.3%-to-5.4% range, near multi-decade highs though a touch lower on the week as global demand pulled them off recent highs. The move is driven by a near-certain Bank of England (BoE) hike priced for 5 November, the energy shock, and fiscal anxiety ahead of the UK Budget on 28 October.

Equities

The NASDAQ 100 closed down 2.90% at 28,958.69 and the S&P 500 fell 1.21% to 7,663.43, its worst session since July, with the Philadelphia Semiconductor Index collapsing nearly 7%. Yet the Dow was essentially flat, and the Dow Jones Composite actually rose 0.68% to 16,560.6, with defensives like staples, utilities, health care all rallying. Technology fell over 3% as Lam Research sank almost 12% on a supply-chain warning and Meta lost around 7% on concerns over its AI-spending commitments. The weekly scoreboard tells the same story more clearly than Thursday’s headline: the Dow is up around 1.7% on the week, and the S&P 500 is essentially flat, while the NASDAQ is down around 0.5%, the second consecutive week of tech underperformance and defensive leadership. It is important to note that this volatility is a de-rating (downward adjustment of the valuation multiple) of the crowded AI trade and a rotation into safety, not a broad growth scare.

The selling has followed through in Asia, which is closing the week sharply lower. The KOSPI is down 2.31%, hit hardest given its semiconductor weighting and the direct read-through from the US chip rout, the Nikkei 225 was down around 0.3%, and the MSCI AC Asia Pacific index is down 0.81%. This is a risk signal ahead of the opening of European and South African markets and points to a soft start for cyclical and tech-exposed markets.

European equities were already on the back foot, the Euro Stoxx 50 down 1.9%% to its lowest level since mid-June on Thursday, pressured by rising global yields and higher-for-longer rate expectations. Because European cash closed before the worst of Wall Street’s afternoon slide, today’s open is where the region will likely absorb it. We can expect semiconductors, technology, luxury and cyclicals to bear the brunt of the risk-off sentiment, partly cushioned by energy and defensives.

European equities were already on the back foot, the Euro Stoxx 50 down 1.9%% to its lowest level since mid-June on Thursday, pressured by rising global yields and higher-for-longer rate expectations. Because European cash closed before the worst of Wall Street’s afternoon slide, today’s open is where the region will likely absorb it. We can expect semiconductors, technology, luxury and cyclicals to bear the brunt of the risk-off sentiment, partly cushioned by energy and defensives.

The UK’s FTSE 100 has been trading in the 10,700s, near record territory, broadly flat on the week and down just 0.26% on Thursday; a notable outperformance. Its heavy energy and defensive, dividend-paying composition gives it a peculiar positioning in the current landscape, as surging oil supports its energy majors and the defensive rotation plays to its weighting. It should prove more resilient than the tech-heavy indices even as it tracks the global risk-off move.

Commodities

Spot gold is trading around $4,015/ounce, roughly flat overnight after Thursday’s 2.7% slide, and down around 3.6% on the week, its weakest stretch in some time. On a classic risk-off day, safe-haven demand flowed into Treasuries and cash, not bullion, with gold instead seeing profit-taking after its strong run. The overnight stabilisation seems tentative, and gold is now trading as much as a financial instrument as a safe haven.

The euro is trading around $1.1215/€, slightly softer than Thursday’s $1.1230/€ close and broadly flat on the week. The ECB’s residual hiking bias still supports the euro on a medium-term view, but the near-term drift is lower as risk sentiment sours in the European Union region, following a week of violent protests across many countries in the bloc.

Sterling is around $1.3395/£, holding up better than the euro and is the firmest of the majors, up around half a percent on the week. The pound is carried by aggressive BoE hike expectations with a move priced in for 5 November, reflecting the UK’s uncomfortable inflation and fiscal backdrop, with the UK Autumn Budget next week a genuine two-way risk.

Currencies

The US Dollar Index eased roughly 0.5% to around 102, pulling back from the 18-month high near 102.7 it printed on Wednesday, when a higher-than-expected US CPI print was released. The move is about relative policy expectations, not dollar weakness per se as the greenback remains near multi-month highs, but the halving of October Fed-hike odds trimmed its rate advantage at the margin. The key near-term swing factor is Fed Chair Warsh’s appearance today and then the FOMC taking place on 27 and 28 October. Until then, the dollar is likely to trade off every Fed comment rather than off the data.

The euro firmed about 0.3% to around $1.1190/€ to $1.1210/€, recovering from an 18-month low as the dollar softened. The bounce is dollar-led rather than euro-driven; with Bund yields near the bottom of the developed-market range and no fresh domestic catalyst, the single currency lacks its own impetus.

Sterling was the standout, rising through $1.3250/£ to its highest level since 6 October and rebounding from Wednesday’s 11-month low near $1.3150/£. A weaker dollar and a UK growth surprise – where August GDP rose 0.1% against expectations of a contraction and with factory output notably firm – hardened expectations of a November BoE hike to 4%. The $/£ pairing still sits well below its August highs of near $1.37/£. Major UK data releases scheduled for 20 and 21 October and BoE Governor, Andrew Bailey’s remarks today are the pound’s next tests.

*Please note that all information is at the time of writing.

Key indicators:

GBP/USD: 1.3399
GBP/EUR: 1.1941
GBP/ZAR: 22.15

BRENT CRUDE: $113
GOLD: $4,023

Sources: Bloombe…, CNBC, Fortune, Investing.com and US Securities and Exchange Commission.

Written by Citadel Global Managing Director, Bianca Botes.

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