Sensei’s Morning Forecast: Trump–Xi Make Peace, Powell Ends QT — Are Markets Entering a New Era?
Markets got everything this week: a Trump–Xi truce, a Fed rate cut, and Big Tech earnings that redefine what AI growth really costs.
👀 Today’s Stories at a Glance
🌏 Trump–Xi Trade Truce: Tariffs reduced and rare-earth deal signals renewed cooperation between U.S. and China.
⚙️ Nvidia Chips Off the Table: U.S. refuses to ease AI chip controls, keeping Nvidia’s Blackwell tech off limits.
⚡ Meta Q3 Earnings: Record revenue overshadowed by soaring AI spending and 83% net income drop from tax charge.
🚀 Alphabet Q3 Earnings: Breaks $100B revenue for first time, fueled by AI-driven growth across cloud and search.
🖥️ Microsoft Q3 Earnings: Azure-led growth impresses, but surging AI capex raises long-term profitability questions.
🔍 Fed Cuts Rate, Ends QT: Fed lowers rates, ends QT, and signals caution ahead amid unclear labor market signals.
🧠 One Big Thing
The Fed just ended Quantitative Tightening and delivered its second straight rate cut—down to 3.75%–4.00%. This signals a major policy shift after nearly two years of tightening. Chair Powell called it a “neutral recalibration,” not a pivot—yet markets took it as dovish. Yields dipped, equities climbed, and the dollar softened. The tightening era may be over.
💰 Money Move of the Day
Bond investors: shorter-duration Treasuries are back in play. With the Fed halting QT and rate cuts in motion, yields on short-term bills remain attractive with reduced reinvestment risk. Laddering 3–12 month T-bills could lock in solid returns while preserving flexibility in a shifting rate environment.
📊 Market Snapshot
Cryptocurrencies:
Bitcoin (BTC): $110,000.22 (▼ -0.04%)
Ethereum (ETH): $3,881.38 (▼ -0.58%)
XRP: $2.55 (▲ +0.06%)
Equity Indices (Futures):
S&P 500: 6,888.1 (▲ +0.03%)
NASDAQ 100: 26,232.00 (▼ -0.12%)
FTSE 100: 9,712.95 (▼ -0.45%)
Commodities & Bonds:
10-Year US Treasury Yield: 4.080% (▲ +0.05%)
Oil (WTI): $60.364 (▼ -0.46%)
Gold: $3,978.788 (▲ +1.27%)
Silver: $48.003 (▲ +1.04%)
🕒 Data as of UK (BST): 11:12 / US (EST): 07:12 / Asia (Tokyo): 20:12
✅ 5 Things to Know Today
🌏 Trump–Xi Trade Truce: Tariffs Eased, Rare Earth Deal Signals Reset
U.S. President Donald Trump and Chinese President Xi Jinping confirmed a one-year extension of the tariff truce following direct talks on the sidelines of the APEC summit in Gyeongju, marking the most significant de-escalation in U.S.–China trade tensions since 2019 (Reuters). The agreement will reduce U.S. tariffs on Chinese imports, notably halving “fentanyl-related” tariffs from 20% to 10%, while Beijing resumes large-scale agricultural imports such as soybeans, sorghum, and pork (Al Jazeera). Washington also extended a suspension of select reciprocal tariffs for another year, offering relief to manufacturers in consumer electronics and autos (ABC News). The deal, negotiated by Treasury Secretary Janet Yellen and Vice Premier He Lifeng, was announced through coordinated government statements and broadcast widely across global media, with Trump calling it an “amazing outcome for both nations.”
The most strategic component involves rare-earth and technology cooperation. China will pause newly imposed export controls on rare-earth magnets—vital for electric vehicles, defense systems, and semiconductors—while the U.S. begins rolling back expanded export restrictions on Chinese tech firms (DW). Both nations also committed to forming joint working groups on energy, artificial intelligence, and trade policy, signaling a renewed attempt to stabilize relations and restore investor confidence (SCMP). Market reaction was swift: Asian equities climbed more than 2%, the yuan strengthened, and commodity futures rallied as traders priced in reduced supply chain risks and renewed cross-border cooperation.
Sensei’s Insight: The optics are cooperative, but the calculus is tactical. Both powers are buying time—calming markets today while quietly preserving leverage for tomorrow’s geopolitical and technological battles.
⚙️ Nvidia Chips Off the Table: U.S. Holds the Line on High-End AI Exports
While the APEC summit between President Donald Trump and President Xi Jinping delivered broad tariff relief and rare-earth cooperation, U.S. semiconductor export controls remained untouched—a deliberate omission highlighting Washington’s strategic red lines (Reuters). Ahead of the meeting, markets speculated that Nvidia Corp.’s Blackwell AI chips could feature in a potential breakthrough, but Trump confirmed afterward that the topic was not discussed and that no export relaxation is planned. Instead, the U.S. may allow Chinese purchases of legacy and mid-tier Nvidia (NVDA 0.00%↑) products, a move aimed at maintaining limited commercial engagement without compromising national security (Bloomberg). Trump added that he intends to speak directly with Nvidia CEO Jensen Huang regarding permissible product lines—underscoring that chip diplomacy remains tightly controlled at the executive level.
For Beijing, the absence of chip concessions underscores a deeper divide. While tariffs, agriculture, and rare earths saw progress, AI semiconductors remain a strategic firewall—with Washington viewing advanced chip access as inseparable from defense and intelligence concerns (NYT). China, meanwhile, continues to leverage its dominance in critical mineral exports to pressure for broader tech cooperation, framing chip controls as a form of economic containment (BBC). Both sides signaled interest in future talks, but insiders say any discussion of Blackwell or next-gen AI chips would occur “directly between manufacturers,” not through diplomatic channels. The semiconductor front thus remains the one domain still defined by containment, not compromise.
Sensei’s Insight: The trade thaw ends at the chip border. Nvidia’s Blackwell remains a national asset, not a bargaining chip—and Washington’s refusal to budge confirms tech supremacy as the real currency of power.
⚡ Meta Q3 Earnings: Record Revenue, Massive AI Spend, and Investor Caution
Meta Platforms (NASDAQ: META 0.00%↑ ) delivered a strong top-line performance for Q3 2025, reporting $51.2 billion in revenue, up 26% year-over-year, propelled by robust ad placement growth and steady user engagement across Facebook, Instagram, and WhatsApp, which now reach 3.5 billion daily active users (CNBC). Yet the headline figures masked a sharp 83% drop in net income to $2.7 billion, primarily due to a one-time $15.9 billion tax charge tied to deferred obligations (Reuters). Excluding this adjustment, adjusted EPS came in at $7.25, beating Wall Street estimates and highlighting strong underlying operations. The company’s operating margin held firm at 40%, demonstrating resilience amid heavy reinvestment and broader AI spending trends dominating Big Tech’s current cycle (Fortune).
Investor attention quickly shifted to Meta’s capital expenditure trajectory, which management raised to $70–72 billion for FY2025, up from earlier guidance of $65 billion. The bulk of this increase is earmarked for AI infrastructure expansion, including next-generation data centers, custom training clusters, and large language model integration across Meta’s apps (Meta Investor Relations). CEO Mark Zuckerberg told analysts that AI investments are “notably larger than anticipated,” emphasizing Meta’s push to maintain leadership in recommender systems, generative AI models, and real-time content moderation (Medianama). Still, markets reacted coolly: shares fell 8% after hours as investors weighed surging costs against uncertain timelines for AI-driven margin recovery (Reuters).
Sensei’s Insight: Meta’s growth engine is humming, but the real test lies ahead. The balance between scaling AI infrastructure and defending profitability will define its 2026 story—and determine whether today’s spending surge becomes tomorrow’s moat or margin drag.
🚀 Alphabet Q3 Earnings: AI Powers Record Revenue Surge
Alphabet Inc. (NASDAQ: GOOGL 0.00%↑ ) reported a record-breaking $102.3 billion in Q3 2025 revenue, a 16% year-over-year increase that comfortably surpassed Wall Street’s $99.9 billion forecast (CNBC). This marks the company’s first-ever $100 billion quarter, underscoring the accelerating monetization of Google’s AI ecosystem. CEO Sundar Pichai credited AI-driven products as the central growth engine, revealing that revenue from generative AI offerings has surged over 200% year-on-year (Google Blog).
Google Cloud stood out as a major contributor, posting $15.2 billion in revenue, up 34% year-over-year, powered by robust enterprise demand for AI computing and long-term service contracts now totaling $155 billion in backlog (Yahoo Finance). The company’s flagship AI model Gemini is processing roughly 7 billion tokens per minute, with 650 million monthly active users, highlighting the explosive adoption of AI tools across business and consumer applications (WSJ).
Beyond cloud services, Search and YouTube subscriptions achieved double-digit growth, and companywide profits rose 33% to $35 billion, reflecting efficiency gains even amid heavy AI investment (Investopedia). Pichai emphasized Alphabet’s “full-stack AI strategy,” integrating AI across every product layer—from search to cloud to ads—and reaffirmed plans to expand infrastructure spending to secure long-term competitive advantage.
Sensei’s Insight: Alphabet’s century-mark quarter proves AI isn’t just hype—it’s now a top-line driver. The question ahead: can margin discipline keep pace as capital intensity in the AI arms race continues to climb?
🖥️ Microsoft Q3 Earnings: AI and Azure Fuel Growth Amid Soaring Capex
Microsoft Corp. (NASDAQ: MSFT 0.00%↑ ) posted another strong quarter, with Q3 2025 revenue hitting $64.5 billion, up 12% year-over-year and ahead of consensus expectations (BBC). Net income climbed 18% to $24.1 billion, while an operating margin of 42% underscored the company’s ability to convert aggressive AI and cloud investment into profitability. Growth was driven primarily by Azure, which saw revenue surge 28%, outpacing rivals as enterprises expanded use of Microsoft’s generative AI and workflow automation products. CEO Satya Nadella credited the “AI-first transformation” across the Microsoft ecosystem, citing Copilot, GitHub AI, and sector-specific partnerships in healthcare and financial services as core contributors (Storyboard18).
AI-driven demand continues to reshape Microsoft’s cloud profile: 52% of Azure’s new contracts now include AI components, feeding a $76 billion cloud backlog expected to deliver through 2027. However, capital intensity is rising sharply—capex surged 89% YoY to $34.9 billion, reflecting large-scale buildouts of next-gen data centers and AI model training infrastructure (Bloomberg). Management reaffirmed its long-term commitment to elevated spending through FY26, positioning for future AI margin leverage once current deployments mature. Despite operational strength, shares fell modestly after hours as investors digested the slower payoff timeline and mounting infrastructure costs (Manx Radio).
Sensei’s Insight: Microsoft’s performance highlights Big Tech’s central dilemma—scale AI fast enough to lead, but efficiently enough to sustain margins. Execution, not vision, will define the winners in this capex-heavy phase of the AI race.
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🔍Deep Dive: ✨ Fed Cuts Rate, Ends QT, Signals December Decision Is No Sure Thing
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