Nobel prizes, AI deals and tariffs.

October 13th, 2025

What a week it was. From a humanitarian aspect it was a relief to see Israel and Hamas agreeing a peace deal, allegedly drafted and negotiated by President Trump. Whether this marks the end of the suffering of innocent people on both sides remains to be seen. But it was not enough to earn him the Peace Nobel Price , which he desperately wanted. Instead the Norwegians voted on Friday to offer it to Mrs. Maria Corina Machado, the head of the opposition party in Venezuela who has fought relentlessly to dethrone the dictator Maduro and establish a democracy in the beleaguered country.

We can imagine President Trump sitting in his office and receiving the news, at the same time that China announced more export controls on rare-earth minerals. In the meantime China had also filed an antitrust probe against Qualcomm, had sent customs inspectors to block imports of Nvidia's China-specific chips and announced port fees for US ships. The news from Norway and China were too much to handle. He grabbed his mobile phone and started tweeting that 100% tariffs on top of the existing ones will be imposed on Chinese imports while threatening to cancel the South Korea meeting with President Xi Jinping, scheduled in about two weeks. All hell broke loose.

Are we entering a new volatile phase in markets ? The US market was quick to react on Friday with a 3% drop , as the "Liberation" day aftermath is still fresh in memory. Whether this is the beginning of something bigger we cannot tell, of course. But for starters, we have been on the cautious side for some time now, as technical conditions were hugely overbought and bubbly behavior had been spotted in the US. We even turned cautious on the new beloved theme of European consumer names, although we really liked them when they were trading at almost distressed valuations a few months ago. Our main point is that the tariff impact is yet to be felt for the European exporters and their underlying business has stabilized but does not show any signs of growth. To our credit, BMW lowered its guidance for 2025 and Ferrari lowered its guidance for sales growth for 2025-2030 causing its stock to suffer the worst day (-14%) in its history as a listed company. Opportunities will arise again, most probably.

In the meantime, the investment community received news of yet another mega-deal in the Artificial Intelligence arena. OpenAI (ChatGPT's creator) made another deal, with AMD this time, which sent the shares of the latter skyrocketing by more than 30% for the week. Although the amount was not disclosed, it was easy to get a feeling of the order of magnitude as OpenAI spoke about 6 Gigawatt of AMD Graphic Processing Units (GPU) in the next 5 years, each of which costs about 50bn$ at current prices and will also have the right to acquire 10% of AMD's capital. But there is a small issue here. OpenAI has now committed in signed deals to spend almost 1trn$ on infrastructure while not having even a fraction of this cash and earns revenues that will barely surpass 10bn$ in 2025, which go down the drains as it is still a loss-making company. The whole promise of this huge spending is based on hopes of exponential growth in revenues in the years to come. It already sports a 500bn$ valuation according to the latest round of funding and the market believes it is the next Nvidia and going to reach a multi-trillion market capitalization eventually.

But the circular nature of AI deals has started raising eyebrows and brings memories of 1999. Let's see an example: Nvidia, is helping OpenAI's spending plans by investing 100bn$ in it. OpenAI has agreed to buy 300bn$ worth of cloud computing from Oracle. Oracle's shareholders were orgasmic with the order, but then again Oracle is buying chips from Nvidia, so its own capital expenditure bill will explode and a large portion of the money will get back to Nvidia. And there have been numerous such deals in the previous weeks. It is almost impossible to understand the flow of money and who is finally keeping what as profits, as everyone must spend tremendous amounts of money to be able to fulfill the orders that they have received. For the users of AI technology it is almost certain that it will lead to enhanced productivity and better efficiency. For the providers of this technology who are planning to spend trillions of dollars in order to provide this service and make money out of it, there is still a big question mark. The good scenario is that the huge capital spending will eventually convert into a significant growth of revenues for the companies involved. For the bad scenario, you just have to look at charts of Telecom companies' shares in the 2000s.

The published minutes from the last FED meeting were the only "macro" news of note. Although cutting interest rates was agreed unanimously (the only dissent was from Trump's new appointment , Mr. Miran for 50bp), we now know that the voting members are divided on how fast rates should be cut and how low they should eventually go. The common message was that the economy has more downside risk than upside: “…low hiring and firing rates, which are evidence of less dynamism in the labor market; concentrated job gains in a small number of sectors; and increases in unemployment rates for groups that have historically shown greater sensitivity to cyclical changes in economic activity, such as those for African Americans and young people.” At the same time, there was agreement with the majority of participants about the “…upside risks to their outlooks for inflation.” With the stagflation scenario remaining alive, the FED has chosen for now to focus on the weakening labor market. A spike of inflation could, of course, change that.

Equities had a rough week, which came almost exclusively on Friday. The US indices fell 2.5% for the week after sporting new record highs days before. Consumer Staples (+0.1%) and Utilities (+1%) were the only sectors to escape. Europe also fell by 2% on average while Swiss stocks outperformed, flat for the week. As the Chinese news came close to the European open on Friday, most of its impact will be felt in the next days, unless something changes between the US and China.

Bonds moved higher, in response to the equity turmoil. In the absence of any macro news combined with the continuation of the US government shutdown, the path of least resistance was south for yields, with the 10yr touching a low of 4.05%. In Germany the yield curve also moved lower by about 5-6bp across maturities , and the 10yr traded below 2.65%. As already mentioned several times, our view is to stick to 3-5year maturities both in the USD and EUR and high quality long-maturity bonds are primarily suited for portfolios heavily invested in equities, because they could act as a hedge. In a stagflation scenario as mentioned above, these positions will be not a hedge of course, but rather gasoline thrown on fire.

Chart of the Week : Is this time different ... ?

The above chart shows the performance of a basket of stocks compiled by UBS which they call it "Low Quality", as it contains small, profit-less companies of speculative nature. The basket is up almost 100% since the bottom registered during the "liberation days" in April. Interestingly the basket had performed similarly in 2021, during the pandemic bubble which burst in 2022. The result then was a 56% drop from the peak. The investors who bought such stocks at the peak and managed to hold on to their positions while the floor was tumbling underneath them have only just now returned to their capital after four years. And this has happened thanks to another speculative bubble. History has shown that a blood-bath usually follows such runs. Will this time be different ? History will tell, but usually it is always the same.

Disclaimer

• The content of this document has been produced from publicly available information as well as from internal research and rigorous efforts have been made to verify the accuracy and reasonableness of the hypotheses used. Although unlikely, omissions or errors might however happen.

• The data included in this document are based on past performances and do not constitute an indicator or a guarantee of future performances. Performances are not constant over time and can be positive or negative.

• This document is intended for informational purposes only and should not be construed as an offer or solicitation for the purchase or sale of any financial instrument and it should not be considered as investment advice. The market valuations, views, and calculations contained herein are estimates only and are subject to change without notice. Any investment decision needs to be discussed with your advisor and cannot be based only on this document.

• This document is strictly confidential and should not be distributed further without the explicit consent of Kendra Securities House SA.

• Sources: Chart of the Week : FactSet