AI Mania Trumps Political Turmoil
US stocks extended their rally to hit new record highs as optimism in the Artificial Intelligence (AI) and semiconductor sectors more than offset concerns over a government shutdown and a sudden political crisis in France. The blue-chip S&P 500 and technology focussed Nasdaq indices gained 1.2% and 1.6% respectively.
Shares in chipmaker Advanced Micro Devices (AMD) jumped more than 23% on Monday after it announced that it had signed a multibillion-dollar deal with OpenAI, the creator of ChatGPT, to build out AI infrastructure over multiple years. The gains increased AMD’s market capitalisation to $330 billion, valuing the company higher the Coca-Cola, General Electric and Chevron. As part of the deal, Open AI can buy up to 160 million shares in AMD at a cent apiece.
OpenAI will deploy 6 gigawatts worth of AMD’s AI graphics processing units (GPUs) beginning in the second half of next year. To give it some context, 6 GW equates to the energy use of 5 million American households or three times the annual electricity production of Hoover Dam.
The deal comes hot on the heels of a larger agreement between OpenAI and AMD’s rival Nvidia. The $4.5 trillion chip giant will invest up to $100 billion in OpenAI and build out at least 10 GW of AI data centres in a strategic partnership.
Closer to home, the FTSE 100 also hit a new record high of just shy of 9,500, boosted by the stellar performance of AstraZeneca, the largest constituent in the index. Shares in the pharmaceutical giant rose more than 11% last Wednesday after US President Trump announced a government-run website enabling consumers to buy drugs directly from manufacturers, easing earlier concerns over potential tariffs on pharmaceutical imports. AstraZeneca generates almost half of its revenue in the US.
AstraZeneca, headquartered in Cambridge, also announced that it will list its shares directly on the New York Stock Exchange to enable it to “reach a broader mix of global investors”, including the very wealth US pension funds. Although it will retain a listing on the London Stock Exchange, the move is expected to cost the UK up to £200 million per year in lost stamp duty.
As expected, the US federal government partially shutdown at 12:01 am EDT on 1st October, the eleventh shutdown in modern US history and the first since the 35-day shutdown from December 2018 to January 2019 during the first Trump administration.
The impasse follows Congress’ failure to pass legislation for fiscal year 2026 with the president labelling it a “Democrat Shutdown” and directing agencies to prepare for thousands of layoffs. Meanwhile, leading Democrats, including Senate Minority Leader Chuck Schumer, accuse the Republicans of “bullying” and refusing to act in good faith. Key sticking points include White House demands for spending cuts and elimination of enhanced Affordable Care Act (“Obamacare”) subsidies set to lapse at the end of the year.
Most non-essential departments have been shuttered, including the Bureau of Labor Statistics which meant that the monthly nonfarm payrolls report couldn’t be released on Friday afternoon.
Whilst events in Washington were expected, the collapse of France’s minority government on Monday morning was a surprise. Newly appointed Prime Minister Sébastien Lecornu resigned less than a month after his appointment after a backlash against the new cabinet announced by President Macron a day earlier.
Politicians on both sides of the political spectrum were furious that most senior members from previous cabinets remained, including Lecornu’s allies in the conservative Les Républicains party. Lecornu’s departure deepens France’s political crisis at a time the government is under pressure to tackle fiscal deficit which at 5.4% of GDP is the highest in the Eurozone. French stocks and government bonds sold off sharply on the news.
In commodity markets, precious metals, including gold and silver, continued their remarkable rally on the back of last week’s political uncertainties. Gold has risen more than 50% so far this year to a record $3,960 an ounce, and silver which is also used for industrial purposes, has gained 66% to just shy of its peak. Brent Crude, however, slipped 4% to $65 a barrel after the OPEC+ cartel revealed a plan to increase output by 137,000 per day in November.
(Cover Image Source: Igor Omilaev)