Highlights:
French government bonds (OATs) sold off amidst concerns surrounding debt levels and economic growth. However, OATs represent just ~3% of global bond indexes and pose minimal direct risk exposure to most investors. [1]
Inflation grew at a 3.7% annual rate in September with the Consumer Price Index (CPI) showing a 20.4% increase in energy prices. [2]
The Federal Reserve held interest rates steady in a range of 3.75%-4.00% during their meeting last week. [3] Markets are currently pricing a 73% likelihood the Fed hikes a quarter of a percent during the December meeting. [4]
Through the end of October, 60% of companies in the S&P 500 have reported earnings. Thus far, earnings have been 1.9% above estimates, which is lower than the 5-year and 10-year average beat rates of 7.5% and 8.0%, respectively. [5]
Big tech firms contributed to the earning weakness, while their massive contributions to the AI buildout are having investors question the ROI.
In a reversal to September’s trend, which saw all sectors ex-technology posting a negative return, last month only saw the technology and communication services sectors fall in price. Despite positive gains across the investing landscape, the S&P 500 lost money in October due to tech’s weight in the index. Several big tech firms sold off following lackluster earnings reports, which had investors scrutinizing the scale of their investments in AI related infrastructure.
While each company disclosed unique challenges and opportunities, a unifying risk is the return on investment the AI buildout presents. Currently, Hyperscalers (defined below) are projected to spend $967 billion in 2026 and $1.4 trillion in 2027, which will mostly go towards datacenters and semiconductors that process large language model queries. However, it’s unclear whether growth in cloud revenues and productivity across the economy will offset the extraordinary amount of capital being committed.
Annual Cloud Capex ($B)
Note: Capex dataset accounts for several cloud/neocloud operators including: Amazon, Google, Microsoft, Meta, Oracle, CoreWeave, Nebius, IREN, and SpaceX; All forward estimates are based on median consensus estimates
Source: J.P. Morgan Cloud Capex Dataset, Bloomberg Finance L.P.
Y/Y Change in Cloud Capex (%)
Note: Capex dataset accounts for several cloud/neocloud operators including: Amazon, Google, Microsoft, Meta, Oracle, CoreWeave, Nebius, IREN, and SpaceX; All forward estimates are based on median consensus estimates
Source: J.P. Morgan Cloud Capex Dataset, Bloomberg Finance L.P.
A factor suggesting demand for cloud related compute is robust, is the exponential growth in token volumes and spending. Over the past year, volume has spiked 33x while spend followed suit at 20x. This explosion in demand is a key reason Hyperscalers are investing trillions of dollars to build datacenters across the country.
Token Volume in Trillions
Source: OpenRouter, J.P. Morgan Estimates
Weekly Token Spend in $Millions
Source: OpenRouter, J.P. Morgan Estimates
Despite increasing demand, we have yet to see meaningful financial gains from the nascent technology equitably spread across the economy. For example, while profit margins of the “Magnificent 7,” a proxy for big tech, have soared the same cannot be said for the rest of the companies in the S&P 500.
Sources: Bloomberg, Macrobond, Apollo Chief Economist
Although the financial benefits have not yet accrued broadly across the economy, you may recall that five years ago, few investors viewed AI as a viable business model. Fast forward to today and companies like Anthropic, founded in 2021, are generating billions in annual revenues and planning to go public [9]. Therefore, humility is warranted when making predictions about the next five years as today’s investment landscape is rapidly evolving. For investors, the uncertainty surrounding AI’s payoff requires building risk-aware portfolios that are flexible enough to participate in continued gains while remaining resilient during periods of adversity.
Sources:
iShares Core International Aggregate Bond ETF (IAGG), BlackRock; Vanguard Total World Bond ETF (BNDW), Vanguard. Author’s calculations using fund holdings data. iShares IAGG | Vanguard BNDW
U.S. Bureau of Labor Statistics. Consumer Price Index, September 2026, October 14, 2026. BLS CPI data
Board of Governors of the Federal Reserve System. Federal Reserve Issues FOMC Statement, October 28, 2026. Federal Reserve
CME Group. CME FedWatch Tool. Accessed October 30, 2026. CME FedWatch
FactSet Research Systems Inc. Earnings Insight, October 30, 2026. FactSet Earnings Insight
J.P. Morgan Research. 3Q26 Sector Preview: Constructive Setup Intact as Supply Constraints, AI Momentum, and Cyclical Recovery Support Further Revisions / Continued Equity Outperformance, October 12, 2026.
J.P. Morgan Research. Data Center Watch: Token Spend Growth Accelerates in October Amid Mixed GPU Rental and Memory Pricing, October 26, 2026.
Apollo Chief Economist. No Signs of AI Payoff Outside the Tech Sector, The Daily Spark, October 24, 2026. Data sources include Bloomberg and Macrobond for the profit-margin chart. Apollo
Anthropic PBC. Registration Statement on Form S-1, U.S. Securities and Exchange Commission, 2026. SEC filing
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