AI Funding Concerns Temper Strong Earnings

For the week ending 23 October 2026

As of midday Friday, global equities were lower on the week amid persistent concerns about the sustainability of financing for the AI buildout. Risk-off price action drove bond yields lower, with the yield on the US 10-year Treasury note falling 12 basis points to 4.997%, while the price of a barrel of West Texas Intermediate crude firmed $3.25 to $101.30. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), rose to 19.9 from 17.7 last week.

MACRO NEWS

Focus on AI financing sharpens

AI’s massive infrastructure buildout is becoming increasingly dependent on debt and other forms of financing as capital spending grows. Recent stress among neoclouds highlights the risk that if funding conditions tighten or AI monetization disappoints, the cash flows supporting these investments could fall short of expectations. For investors, the focus may increasingly shift from the scale of AI spending to whether that investment can earn an adequate return relative to its cost of capital.

Tensions between Iran and the US remain high

Iran warned that it could adopt a broader military strategy if the US resumes attacks. Tehran also said it intends to assert control over the Strait of Hormuz, while allowing transit for countries it considers friendly. The United States and Israel were reportedly preparing for the possibility of renewed strikes after the US elections. In turn, Iran threatened to broaden strikes to include economic and civilian targets if US launches fresh attacks.

Efforts to restart negotiations continued. Mediators discussed proposals that could exchange access to frozen Iranian funds for nuclear concessions, including renewed international inspections. A US diplomat said talks were continuing but pushed back on reports that an agreement was close. In an interview with the Financial Times published Friday, US Ambassador to the United Nations, Mike Waltz, said the US is preparing for a protracted conflict with Iran that could drag on for another year.

Oil continued to flow from the Persian Gulf, with the Wall Street Journal reporting this week that recent flows exceed prewar levels, though a sevenfold rise in shipping costs is keeping energy prices elevated. President Trump acknowledged Thursday that Iran is doing everything it can to drive up oil prices ahead of the US midterm elections on November 3.

Elsewhere in the region, the US reportedly is preparing for the departure of some staff from its embassy in Saudi Arabia, amid ongoing Houthi attacks.

Tentative diplomatic gains between Russia and Ukraine

Diplomatic activity around the war in Ukraine increased this week as US and Ukrainian officials held talks that European leaders described as constructive. Ukrainian President Volodymyr Zelensky said the discussions covered security and economic issues, and that Ukraine must be included in any negotiations about its future.

US envoy Steve Witkoff later met with Russian President Vladimir Putin. Witkoff said the talks were constructive and would continue through technical discussions involving the United States, Russia, and Ukraine. Zelensky said trilateral teams are expected to meet in early November, but significant differences remain. US intelligence sharing with Ukraine resumed, after a period of disruption earlier this week, Zelensky said.

High interest rates deepen the US housing downturn

High interest rates continued to weigh heavily on the US housing market. The National Association of Home Builders confidence index fell to 29, its lowest level since 2012, while housing starts declined 5.2% in September after August’s drop was revised to 5.9%. Existing home sales fell 7.3% to a record low, underscoring how elevated borrowing costs are weakening housing markets.

French unrest compounds fiscal concerns

French government bond yields rose and equities fell, as violent protests deepened concerns about the country’s political and fiscal outlook. The spread between French and German government bond yields widened to 172 basis points, the highest level since the eurozone sovereign debt crisis. The yield on the 10-year French government bond rose above 5% for the first time in 22 years.

The market moves came as investors questioned whether France can pass a budget that addresses its debt burden. Interior Minister Laurent Nuñez offered to resign, but President Emmanuel Macron declined the resignation, citing the need for stable leadership over law and order. The unrest added to concerns about weak growth, political instability, and the government’s ability to restore confidence in its finances. Moody’s is widely expected to downgrade France’s sovereign credit rating later Friday.

QUICK HITS

Preliminary purchasing managers’ indices were mixed in October, with the eurozone composite dragged down by weakness in France.

China’s economy expanded 4.5% from a year earlier in the third quarter, slightly beating expectations as exports remained strong. The country’s consumer price index rose 3.1% from a year earlier in September, below the 3.2% consensus forecast.

The UK consumer price index rose 3.5% from a year earlier in September.

President Trump announced an $8 billion relief package for farmers to offset higher fuel costs.

US consumer spending remained resilient despite high gasoline prices.

A Financial Times survey found that 54% of 94 economists expect many, or nearly all, G20 countries to see significant economic and productivity gains from artificial intelligence over the next decade.

S&P Global warned that major hyperscalers may have more undisclosed AI-linked liabilities than credit ratings currently reflect.

US and Chinese negotiators pressed to finalize trade and investment agreements before an expected meeting between Presidents Trump and Xi on the sidelines of the APEC summit in mid-November.

Japan asked the US to help persuade China to ease restrictions on yttrium, a critical heat-resistant metal used in advanced manufacturing. Japanese officials warned that shortages could emerge by year-end without new supplies or substitutes.

Egypt pledged this week to help defend Saudi Arabia amid continued Houthi attacks.

German Chancellor Friedrich Merz warned this week that Europe is underestimating the threat from Russia.

The US Treasury Department proposed new regulations to bar large institutional investors from buying up single-family homes on Thursday. The ban, which prohibits investors with more than 350 houses from purchasing additional single-family homes, goes into effect January 7.

EARNINGS NEWS

With about 29% of the constituents of the S&P 500 Index having reported, blended earnings per share (which combines reported data with estimates for those companies that have yet to report), rose 38.2% compared with the same quarter last year, according to data from FactSet. Blended sales rose 11.7% over the same period. The Q3 result, if it holds, would mark the eighth consecutive quarter of double-digit earnings growth for the S&P 500, and the third straight quarter of 25%+ growth.

THE WEEK AHEAD

Tuesday: US durable goods, new home sales

Wednesday: US FOMC meeting, trade balance; Bank of Canada meeting

Thursday: US PCE, Q3 GDP; ECB meeting

Friday: Bank of Japan meeting, Japan retail sales, industrial production; eurozone Q3 GDP, unemployment rate; Canada GDP