This week's market outlook: Meta and other companies' financial reports and Nvidia GTC conference become a “big test” for AI transactions. The geopolitical situation continues to influence inflation concerns

The Zhitong Finance App learned that the three major US stock indexes collectively fell last Friday due to factors such as rising international oil prices once again triggering concerns about inflation and rising market concerns about artificial intelligence (AI) transactions. Among them, the US semiconductor sector and large technology stocks experienced significant adjustments, and the NASDAQ index fell more than 2%.

The current bull market in US stocks has just reached its fourth anniversary. AI-related stocks are undoubtedly the core of this bull market. Recently, however, market concerns about whether AI trading can continue have further heated up. The escalation of the situation in the Middle East, Russia, and Ukraine has heightened uncertainty about global oil supply prospects, and continued high US inflation has heated up expectations of the Federal Reserve's interest rate hike, causing technology stocks that are highly sensitive to interest rates to be impacted. At the same time, the market's doubts about the financing methods and return rates of AI infrastructure service providers have further increased. For example, debt-tested cloud computing service provider CoreWeave (CRWV.US) dropped more than 25% last week cumulatively.

Wall Street's focus shifts to corporate earnings

As the market began to worry about the risks associated with financing the AI infrastructure construction boom, related concerns spread throughout the market. Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions, said, “The market narrative is really unsettling.” “Obviously, there is a great deal of uncertainty surrounding the current state of AI.”

In addition to CoreWeave's debt tests, which led to a sharp drop in stock prices, other recent signs of caution include that strategists at Deutsche Bank and RBC Capital Markets each downgraded their recommended ratings for the technology sector. On October 9, Deutsche Bank strategists said that the rotation of capital into the technology sector has “gone too far” and that the risk-return ratio “is no longer attractive” in the short term.

In the face of recent setbacks in AI transactions, the upcoming quarterly results of a number of key companies will test investors' confidence in this round of gains this week. Meta (META.US), a hyperscaler (hyperscaler) that has invested heavily in the construction of AI data centers, semiconductor equipment supplier Fanlin Group (LRCX.US), analog chip giant Texas Instruments (TXN.US), and Musk's Tesla (TSLA.US) and SpaceX (SPCX.US) will be the focus of this week's earnings report.

Investors expect the company to deliver strong results. According to data from LSEG IBES, earnings of S&P 500 constituent stocks are expected to increase by more than 30% in the third quarter. Large-scale investment in AI data centers and infrastructure is a core factor driving profit growth.

According to Goldman Sachs data, Meta is one of the five AI hyperscale cloud service providers. The total capital expenditure of these five companies is expected to increase to about 1.2 trillion US dollars next year. Investors are eager to see signs that these businesses will reap a return on related investments, which will strengthen the market's confidence that this spending model is sustainable.

Kevin Shea, senior stock analyst at BNY Wealth, said, “One of the most important highlights of the earnings season is whether the profitability of hyperscale cloud service providers can grow faster than capital expenditure.” Chuck Carlson, CEO of Horizon Investment Services, said, “As the cost of capital rises, such large-scale capital expenditure expansion will become more expensive, which also raises the threshold for return on investment. Meta will be the first company to try to provide some information on this issue.”

Semiconductor companies are among the biggest beneficiaries of the AI spending boom. Despite the recent poor performance of related stocks — the Philadelphia Stock Exchange Semiconductor Index has fallen by about 12% this month, it is still up 57% from the beginning of the year. By contrast, the S&P 500 is only up about 12% year to date. Meanwhile, the results announced by Fanlin Group and Texas Instruments on Wednesday may provide broader guidance for the semiconductor industry's needs.

Additionally, investors will also pay attention to the results announced by Musk's two companies with a market capitalization of well over 1 trillion dollars: the newly listed space company SpaceX — which also has an AI business — and Tesla. Streaming giant Netflix (NFLX.US), consumer goods company Procter & Gamble (PG.US), and engine manufacturer GE Aerospace (GE.US) will also be other high-profile earnings companies this week.

The rise in US Treasury yields and the possibility of further interest rate hikes by the Federal Reserve remains one of the biggest concerns of stock investors. Analysts at UBS Global Wealth Management said in a report on Thursday: “Another strong earnings season should help the stock market withstand moderately higher interest rates.”

Although the US CPI and PPI data for September released last week both exceeded market expectations and boosted market expectations for the Fed's interest rate hike in October, the market maintained expectations that the Fed would stay on hold in October after Federal Reserve Chairman Walsh delivered a speech last Friday. Futures market pricing shows that most investors still expect the Federal Reserve to wait until the December meeting to raise interest rates for the second time this year.

The Nvidia GTC Berlin conference is coming

In addition to financial reports from companies such as Meta, the Nvidia (NVDA.US) GTC conference to be held in Berlin, Germany this week may also be an important “stress test” for current AI transactions. From October 20 to 22, local time, Nvidia will host the GTC conference in Berlin. CEO Huang Renxun will take the stage to deliver a keynote speech at 11:00 local time on October 21 (17:00 Beijing time). According to Nvidia's official website, the conference topics covered various topics such as accelerated computing, agentic AI (intelligent AI), robotics, open models, physical AI (physical AI), sovereign AI, and AI infrastructure.

If you put it in the past few years, this is probably just another high-profile technology event for the artificial intelligence (AI) industry. However, at this point in time, AI trading is moving from simply expecting an increase in transaction computing power demand to a “settlement stage” where more attention is paid to return on investment.

As the scale of global AI infrastructure investment continues to expand, the capital market's examination of AI transactions is also gradually shifting from “will demand for computing power grow” to a more realistic question: can huge AI capital expenses eventually be converted into sufficient revenue, cash flow, and productivity?

Over the past few years, the AI industry has formed a very strong growth chain: increased model capabilities → demand for computing power increases → cloud vendors increase capital expenses → Nvidia revenue increases → the market raises AI expectations → more capital enters AI infrastructure.

However, by 2026, the market began to question whether this chain could actually close the loop. Especially as AI infrastructure is increasingly dependent on debt financing, the problem has spread further from stock valuations to the credit market. The recent financing and profit pressure faced by AI infrastructure companies is a microcosm of the market beginning to re-examine the return on AI capital expenditure.

Investors are now focusing not only on “strong demand for AI,” but on revenue, free cash flow, return on capital, quality of customer contracts, utilization of computing power, financing costs, and how much the end user is actually willing to pay for AI. In other words, the AI industry is moving from a “technology cycle” to an “economic cycle.”

Therefore, the signals that may be released by the GTC Berlin conference can be reduced to five questions: First, are Vera Rubin's orders and deployments strong enough to prove that the AI infrastructure cycle continues? Second, can Agentic AI drive the continuous growth of inference demand and shift AI computing power requirements from a training cycle to a more stable usage cycle? Third, can AI factories and next-generation computing platforms continue to reduce the cost per token and create more demand for AI usage through efficiency improvements? Fourth, can robotics, autonomous driving, and industrial AI create real large-scale commercial orders to open up a new computing power market for Nvidia other than cloud computing? Fifth, and most importantly — can AI capital expenses of big tech companies ultimately translate into revenue, cash flow, and productivity improvements?

If Hwang In-hoon can give a strong enough answer in Berlin, then recent market concerns about the AI bubble, excessive capital expenditure, and peak demand for computing power may be mitigated to a certain extent. However, if the conference still mainly releases technology roadmaps, forward orders, and capital expenditure plans, and the actual commercial returns of AI applications are still lacking verification, then GTC may instead become an important point for the market to further examine AI valuations.

The Middle East, Russia-Ukraine conflict raises concerns about oil prices and inflation

The recent escalation of the conflict between the Middle East region and Russia and Ukraine is an important reason driving up international oil prices again and heightening concerns about inflation. If oil prices rise further and long-term US bond yields continue to rise, fluctuations in the technology sector are likely to increase further.

In the Middle East, tension between Yemen's Houthis and Saudi Arabia continues to escalate. On October 17, the Houthis in Yemen announced the shooting down of a Saudi “Apache” helicopter gunship near the Najran region on the border with Yemen in Saudi Arabia. On October 18, the Saudi-led multinational coalition confirmed that an AH-6i light helicopter crashed in the same area, but claimed that it was a technical failure and that 2 people on board died.

Furthermore, the Houthis in Yemen attacked Yanbu, an important Saudi crude oil export hub. On the evening of October 18, local time, Yemen's Houthis issued a statement saying that in the past 24 hours, Saudi Arabia has launched 110 air and missile attacks on the Yemeni capital Sana'a and the provinces of Hodeidah, Taiz, Amran, etc., resulting in more than 30 deaths and injuries.

Iran's Revolutionary Guard Navy issued successive statements earlier on October 17 saying that two supertankers exploded and caught fire after being hit by lightning in the Strait of Hormuz. In the early morning of the 19th local time, the Islamic Revolutionary Guard Corps Navy of Iran announced that an illegal tanker hit by lightning in the southern part of the Strait of Hormuz, causing the cabin to explode and catch fire.

The weekly situation review released by the British Maritime Trade Action Office on October 16 shows that in the week up to that day, the agency had received a total of 12 reports of attacks on ships. Of these, 10 occurred in the Strait of Hormuz, while the other 2 occurred in the Persian Gulf and the Gulf of Oman, respectively. At the same time, the agency said that it is currently difficult to accurately count the actual number of ships attacked because most of the ships attacked refuse to report it to the agency.

Russia and Ukraine continue to launch tit-for-tat attacks on energy infrastructure. Ukrainian President Zelensky said on October 18, local time, that since US President Trump announced an “energy cease-fire,” Russia has carried out 76 attacks on the Ukrainian energy and oil and gas industry.

Furthermore, Trump said earlier that he reached a diesel export agreement with Russia and postponed the imposition of further sanctions against Russia. On October 18, Russian Deputy Prime Minister Novak, who is in charge of energy, said that Russian diesel fuel will enter the US market within 15 to 20 days after signing the contract. The US Department of Energy has identified companies that will be counterparties and buyers. Commercial terms are currently being negotiated. However, US congressmen proposed a bill on Friday aimed at blocking this agreement, which was also criticized by Republicans.

Jorge Leon, head of geopolitical analysis at Rystad Energy, said: “Increasing attacks on energy infrastructure and ships are weakening the market's hopes that crude oil flows can continue to recover. As the market increasingly takes into account the possibility that supply disruptions will continue for a longer period of time, the risks faced by oil prices this week are increasingly biased towards the upward trend.”