• Stocks: Indexes climbed thanks to a soft jobs report, which bolstered hopes that the Fed won’t raise rates at the end of the month (more on that later). The Nasdaq hit an all-time high during the day before pulling back slightly.
• Bonds: The weak jobs report also gave the bond market a boost as traders priced in the likelihood of no rate hike. Still, Treasury yields rose later in the day.
• Commodities: Oil prices were mixed after G7 nations and partners announced a plan to release 100 million barrels of emergency oil and diesel fuel. Brent crude oil futures rose, while US WTI futures fell.

MARKETS

Illustration: Morning Brew Inc., Photos: Adobe Stock

Just in time for Friday happy hour, jobs data has served up a heady cocktail of good and bad news.

The bad: The US labor market limped along in September, adding just 29,000 jobs—far below the 84,000 hires analysts were expecting. Unemployment also crept up from 4.1% to 4.2%, while annual wage growth came in weak at 3%, the lowest level in five years.

Now, the good: Markets are having a field day, since this all but kills the odds that the Federal Reserve will hike rates at its next meeting later this month. The wind was already blowing in this direction after the Fed’s favorite inflation gauge, the Personal Consumption Expenditures price index, came in cooler than expected at 3.4% on Wednesday. Today’s jobs numbers serve as the “nail in the coffin for an October hike,” Jefferies Chief US Economist Thomas Simons said in a note.

Most of the job gains came from healthcare (up 17,000), construction (+11,000), and manufacturing (+9,000). On the losing end: Government employment fell by 17,000, temp help by 11,000, and information services by 10,000—a decline that tracks with growing concerns of AI replacing these roles. Financial activities rounded out the losses, down 7,000.

September’s soft job numbers came with negative revisions of earlier months, too: August gains were slashed to 133,000 jobs, while July switched from gains to a loss of 10,000. That adds up to 60,000 fewer jobs than we thought we had.

The Fed’s next hike

But back to the silver lining: The Fed’s odds of holding rates steady at its next meeting have jumped to nearly 80%, according to CME Group’s FedWatch tool. Just last week, markets had priced in 70% odds of a hike. This new turn of events could help keep a lid on borrowing costs for mortgages, car loans, and more, which have been climbing amid rising oil prices and the Fed’s last rate hike in September.

On top of labor data, several Fed officials piped up this week to say they saw “no need for urgency” to raise rates. Fed projections last month predicted at least one more hike as likely this year. After October, there’s just one more opportunity to deliver it: December. CME forecasts a 67.4% chance of a quarter-point hike then.

Only time will tell what that means for our Christmas lists. But if Santa’s taking requests, lower rates could be the best stocking stuffer anyone could wish for.—JD

      

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Stocks

🟢 What’s up

• Nvidia climbed 1.34% to a fresh all-time high, reaching a $5.7 trillion market cap as spending on AI infrastructure continued to surge.
• Tesla gained 4.65% after third-quarter vehicle deliveries beat Wall Street expectations.
• Robinhood jumped 1.43% as traders increasingly paired its tokenized stocks with memecoins in crypto markets.
• Synaptics surged 14.08% and On Semiconductor gained 6.01% after lowering the price of their merger to $5.7 billion in cash.
• HPE rallied 7.39% on strong long-term targets fueled by growing demand for AI and data center infrastructure.
• Carvana climbed 1.16% following bullish commentary from JPMorgan Chase, which called it the “best story in [the] auto ecosystem.”
• SpaceX popped 7.35% following three successful launches carrying astronauts, satellites, and a US intelligence payload.

🔴 What’s down

• Nike sank 3.64% after reporting declining revenue, issuing disappointing guidance, and announcing plans for more layoffs.
• Seagate lost 10.21% and Western Digital dropped 10.22% on reports that rival Toshiba plans to double production capacity for hard drives used in AI data centers.
• Rivian fell 3.12% despite a 46% jump in quarterly vehicle deliveries, as investors were disappointed that the EV maker maintained rather than raised its full-year outlook.

Stat of the day

AI needs you to spend a lot more money

Morning Brew Inc, Photo: Adobe Stock

Every few days, AI seems to produce another number that makes the last one look quaint. For example: the AI buildout is already the largest infrastructure investment in American history. Between 2025 and 2032, spending on data centers and related infrastructure could reach $10.3 trillion, or an average of 3.6% of US GDP every year, according to estimates from Columbia professor Stijn Van Nieuwerburgh.

But eventually, those investments need to generate enough revenue to earn a return. In other words, businesses and consumers will have to buy a whole lot of AI.

So, how much is a whole lot? Van Nieuwerburgh estimates that by 2032, businesses and consumers would need to spend roughly 9% of US GDP per year on AI services to justify the investment pouring into the technology today. That would translate to about $3.5 trillion in annual AI revenue.

A 9% slice of GDP is roughly the same share Americans spend every year on food, and about twice what the country spends on energy or computers and software.

However you slice it

Whether the math winds up mathing comes down to two competing forces. The law of diminishing returns dictates that once the most valuable uses for AI are already in place, each additional dollar spent on it produces less additional value, putting a natural ceiling on demand. The Jevons paradox suggests the opposite: As AI gets cheaper and better, people may find enough new uses for it that total spending keeps rising.

Whatever the outcome, AI is clearly headed for an even bigger role in the economy. Though if we’re spending trillions on AI instead of food, future generations may find that Claude stole their lunch money.—SY

INVESTING

Morning Brew, Inc., Photos: Getty Images

Apparently, building the future is expensive—so much so that Big Tech wants someone else to help pay for it.

Amazon is reportedly considering putting about $8 billion worth of Nvidia Grace Blackwell chips into a special-purpose vehicle funded by outside investors, then leasing the chips right back. The vehicle would raise debt and could sell investors an equity stake of up to 10%, giving Amazon a more asset-light way to keep feeding AWS’s appetite for computing power.

Passing the bill

Why bother, you ask? Amazon expects to spend a whopping $220 billion on capex this year, much of it to expand AWS and AI infrastructure, up from an earlier forecast of $200 billion. But even Big Tech’s deep pockets have limits, and bringing in outside capital lets companies keep building without footing the entire bill themselves.

Amazon’s proposed deal is part of a broader shift in who finances the AI boom. The five largest AI hyperscalers are expected to spend more than $800 billion this year and $1.2 trillion next year, according to Goldman Sachs, and they’ll take any opportunity to offload those expenses.

That’s why SoftBank raised $11.1 billion last week to fund AI bets that include OpenAI, while Nvidia recently teamed up with Wall Street firms on platforms designed to mobilize more than $500 billion for AI infrastructure.

Follow the money

For long-term investors, the question is whether all this AI infrastructure will eventually earn enough to justify the spending. Credit markets are already starting to wonder about that: AI-related bonds are offering higher yields than the broader investment-grade market, a sign that investors want more compensation for the risk.

And some of the new collateral in these deals is unusually difficult to evaluate. A data center can operate for decades, but GPUs become obsolete much faster. Banks typically depreciate them over three to four years, making billions of dollars of chip-backed financing harder to value as newer models arrive.

The AI trade is no longer just a tech-stock trade. As the boom spreads into bonds, private credit, and infrastructure funds, whether AI generates enough returns to pay for today’s spending could increasingly affect investors across their portfolios.—HC

      

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News

• Disney is planning another major restructuring of its TV business that could consolidate divisions and cut hundreds of jobs.
• The combined Paramount–Warner Bros. Discovery company will be renamed Skydance after its $81 billion merger closes.
• Citadel Securities is taking a minority stake in Wolfe Research, combining Wolfe’s equity research with Citadel’s trading and execution business.
• Blue Owl will again limit quarterly withdrawals at two private-credit funds after investors asked to redeem 16.8% of shares in its flagship fund and 39% in its tech-focused fund.
• Chicago Fed President Austan Goolsbee said both a rate hike and a pause remain “on the table” for October.
• Amazon will invest more than $1 billion over five years in communities hosting its data centers, as the AI infrastructure buildout faces growing local opposition.

Calendar

Monday: No earnings of note, but we’ll have the services PMI report to keep an eye on.

Tuesday: Constellation Brands will give investors earnings to sip on, along with food maker Lamb Weston.

Wednesday: Earnings pick up the pace a bit, with Levi Strauss and Applied Digital Corporation reporting quarterly numbers.

Thursday: More earnings reports come in from PepsiCo, NovaGold Resources, and Nurix Therapeutics. Plus, we’ll check in on weekly initial jobless claims and monthly wholesale trade for August.

Friday: Delta Air Lines earnings close out the week for us. Plus, after this week’s gloomy consumer confidence numbers, the October University of Michigan sentiment survey should catch some attention as well.

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