Bi-MONTHLY MARKET ANALYSIS &

ECONOMIC UPDATES

November 6, 2025

AI Spending Spree

It’s the driving force behind the fourth industrial revolution; Artificial Intelligence. Measured by the unprecedented capital expenditures – past, present and future – committed to AI underscore the megatrend is going strong. There has been an AI spending spree resulting in what has recently become a flurry of complex AI investments, partnerships and complex financing arrangements. Just this week OpenAI added Amazon to its computing partners through a $38 billion commitment, just a small addition to the more than $1 trillion in total spending the ChatGPT developer has planned. Meanwhile, Amazon and peer Microsoft struck multibillion-dollar deals for additional capacity from Bitcoin miners-turned-AI computing companies. Hinting that tech giants can’t fund all AI spending entirely from their cash flows, some are borrowing. Google just raised $25 billion in debt. Meta Platforms raised around $30 billion that way last month. All of this is being justified by the overwhelming demand for AI computing. Below is a chart of spending on AI by just the four “Hpyerscalers”: Microsoft, Meta, Amazon & Google.

Meta’s (Facebook) Chief Executive Mark Zuckerberg underscored what appears to be a theme in the AI spending spree: “The opportunity is so huge that, as these companies see it, overspending is probably not going to be a problem. My view is that rather than continuing to be constrained on capex …the right thing to do is to try to accelerate this.”

The Big Tech companies confirmed this week that the trend will continue. Google reported capex of $24 billion in its September quarter, up 83% from the year-ago period. Microsoft recorded spending of $35 billion, up 74%, while Meta reported capex of $19.4 billion, more than double what it spent in the year-ago period. Google and Meta raised capital spending targets for the full year. Meta expects “notably larger” capex in 2026, with overall expense growth outpacing revenue gains. Microsoft exceeded fiscal Q1 capital spending expectations and expects fiscal 2026 capex growth to be steeper than in fiscal 2025. Amazon reported $34.2 billion in cash capex in Q3 and has spent $89.9 billion this year. Amazon expects its cash capex to reach $125 billion for all of this year. The company’s CFO said, “We expect that amount will increase in 2026.” The expected capital required to run AI data centers alone is staggering.

The cost of building and running these data centers is expected to be huge. Data centers capable of handling AI processing workloads are expected to require $5.2 trillion in capital expenditures, according to an April 2025 McKinsey & Company report.

The AI ecosystem has grown to account for an enormous share of the stock market and growth in the overall economy. Artificial Intelligence is projected to significantly boost economic growth by increasing productivity, enabling new products and services, and impacting labor markets. Estimates suggest AI could add trillions to global GDP, though the exact figures vary depending on factors like adoption rates and the specific applications. For example, one estimate forecasts a $7 trillion increase in global GDP over 10 years, while another projects up to $15.7 trillion annually by 2030. It is estimated that spending on AI accounts for half of U.S. GDP. The question being asked now is, “Will the economy survive the AI capex boom?” History warns of overinvestment, shrinking returns and rising risks. The telecom fiber optic buildout in the late 1990’s during the dot-com boom is a good reminder.

Proper Perspective:  In our hectic and often hard to comprehend world, it is very easy to lose perspective. You may agree it is sometimes difficult to see the big picture. The media often doesn’t help with this, but unfortunately instead encourages us to see things in a negative way. Here is hopefully a pause to gain positive perspective.

~~ John Kerry, 2003

What Happened On this Day November 6, 1913: – Mohandas Gandhi is arrested while leading a march of Indian miners in South Africa.

INDICATORS OF INTEREST:

• Market’s Current Signal: Confirmed Uptrend.  Analysis of the stock market over 130 years of history shows we can view it in terms of three stages -market in uptrend, uptrend under pressure and market correction.  Since the 1880’s, this perspective has led to investment out-performance relative to market indexes. This is due to trend analysis which determines risk reducing, return enhancing market entry and exit points. The U.S. stock market’s current signal indicates the market is in Confirmed Uptrend. That officially happened April 22 and is still intact. This has been the fastest market rebound from a bear market low in history. The uptrend is remains. October 12 was the 3rd anniversary of this bull market.

The Stock Market Trend: Confirmed Uptrend. The stock market powered higher Tuesday, April 22 and the Nasdaq and S&P 500 confirmed new rally attempts. That follow-through signaled a Confirmed Uptrend. In late June the major stock market indexes reclaimed levels set in late February and significantly above the pre-“Liberation Day” level. Until late October, the major indexes were making new all-time record highs. October 28 was the 36th new high of 2025 for the SP 500.

Here are key market levels as of Monday, November 6:

Recapping Last Week

Strong earnings reports from some of the “Magnificent 7” technology companies boosted the Nasdaq Composite index by 2.3%, while U.S. Treasury yields rose after the Federal Reserve lowered interest rates but made statements leading to uncertainty about further cuts this year . The S&P500 gained less than 1% while Russell 2000 slid 1.3%, pressured by a rising U.S. dollar. Sector performance tilted negative despite technology’s strong showing. Sectors representing real assets slumped after trade talks between the U.S. and China resulted in a de-escalation of tensions over issues like rare earth exports, although root causes of the conflict remained unresolved. Crude oil prices fell 1% after news emerged that OPEC+ is leaning towards another modest output increase for December. Gold futures fell for a second straight week but stayed above $4,000 per ounce. Investors were wary of huge artificial intelligence investments by U.S. firms like Meta Platforms and Microsoft but were reassured by Alphabet’s ability to fund its plans from current cash flows and Amazon’s strong forecast. Turning to monetary policy, Fed Chair Powell acknowledged there were “strongly differing views” about how to proceed in December, given the lack of official government data. His comment that another rate cut is “not a foregone conclusion” was slightly unnerving to stock and bond investors, although by week’s end the effects were muted. Odds for a December rate cut fell to around 65%, based on fed funds futures. The Fed also announced it would restart limited purchases of Treasury securities to maintain ample liquidity in the banking system. Meanwhile, the U.S. government shutdown extended into a fourth week with no signs of a resolution, and economic data remained sparse. Research firm ADP announced it would release a weekly estimate of the change in private sector employment in addition to its regular monthly report. While the added transparency may help, it still represents a far-from-complete picture of the U.S. labor market. A Chicago Fed estimate showed the September unemployment rate likely stayed steady at 4.3%, although ADP noted that corporate layoffs increased notably last week. Consumer confidence fell in October on dimmer views for the economy and labor markets. Mortgage rates dropped for a fourth straight week, boosting refinancing activity and new applications.

Overseas, the Bank of Japan kept rates unchanged but delivered its strongest signal yet that a hike was possible soon. Inflation accelerated to 2.8% in October, well above the central bank’s 2% target. The European Central Bank also left rates unchanged and offered no clues about future moves. Economic growth has remained steady in the Eurozone despite trade turbulence while inflation hovered near the bank’s goal. The Bank of Canada cut rates by 25 basis points, citing a weakening economy as the impact of U.S. tariffs is becoming more evident. Finally, China’s manufacturing activity contracted more than expected last month while services stayed in expansion territory.

Current View

Major market index price swings are displaying yo-yo like action. The recent volatility has put the stock market’s directional trend in question. However, notable price declines such as the SP500 down 1% or more in a day has only happened 4 times this year since May 1. And today is one of them. For perspective, the annual average daily decline of 1% or more for the SP500 since 1958 is 23. Momentum appears be turning from highly valued tech stocks as earnings reports are pouring in daily. Some analysts are heard saying soaring stock gains have priced them for “perfection”.

For perspective, this year’s stock market gains going into November bode well for the last 2 months of the year. When the SP500 has been up 15% or more going entering November, it has climbed higher 20 out of the 21 occurrences through year end.

• Industry Group Strength:  BULLISH. As of yesterday, 158 out the 197 groups I monitor are up year-to-date. 39 groups are down for the year.
• New Highs vs. New Lows:  BULLISH. In yesterday’s session, there were 212  new 52-week highs and 159 new 52-week lows.
• Dow Dividend Yield:  BEARISH. The current yield for the Dow Jones Industrial Average is 1.79%. The 10-year Treasury now 4.09%.
• Volatility Index: NEUTRAL. Volatility has been volatile. The “VIX” is now 20, up from 18 two weeks ago. The index is also known as the “Fear Index.” It is considered a contrarian indicator and therefore viewed as bullish as it rises indicating investors are becoming more fearful. The VIX:

• Fear / Greed Index:  BULLISH.  Investors are driven by two emotions: fear and greed. Too much fear can create a condition of oversold/ undervalued stock prices. Too much greed can result in overbought/overvalued stock prices. The AAII Investor Sentiment Index is now neutral.   BE FEARFUL WHEN OTHERS ARE GREEDY. At 24, the Fear & Greed Index is up from 28 two weeks ago.

CLICK VIDEO FOR MORE ON THE “FEAR & GREED INDEX”

How CNNMoney’s Fear & Greed Index works

• Bull / Bear Barometer:  BEARISH. This secondary market indicator should also be viewed with a contrarian perspective. As of yesterday, according to the latest survey of stock market newsletter writers by Investor’s Intelligence, the bullish tally is 59.3%, up from 52.8% two weeks ago. The bears are 14.8%, down from 15.1% two weeks ago. Consider this a contrarian indicator because the crowd is often wrong at market tops and bottoms. In other words, extreme bullishness has been seen near several market tops in the past, while extreme bearishness has been seen at market bottoms.

• Put / Call Ratio: NEUTRAL. The ratio of put-to-call options is 0.76, up from 0.37 two weeks ago. The put-call ratio tracks the mood of what options investors are doing, not just saying. They typically buy puts if they think a stock will decline and calls if they think it will rise. If they’re buying lots of puts, they see the market declining. And if they’re loading up on calls, they’re generally bullish. Historically, market bottoms occurred when the reading spikes to 1.2 or more. Market tops are often made when the reading is 0.6 or less. Note how reliable this is with respect to the February record low coinciding with the market high. Keep in mind this is also a contrarian indicator.

Global Economic Indicators & Analysis:

Government Shutdown Disrupts Many Economic Report Releases.

Today is day 37 of the shutdown. It is now the longest government shutdown in U.S. history.

POSITIVE INDICATORS

ISM Services Index Up: The large services side of the U.S. economy grew in October at the fastest pace in eight months with the help of lower interest rates, but businesses expressed lingering worries over high tariffs and said the government shutdown could also cause pain if it drags on. The reading of a survey of businesses such as banks, retailers and restaurants rose to 52.4% in October from 50% in the prior month, the Institute for Supply Management said yesterday. Any number above 50% signals expansion. The improvement in the ISM services index in October “is a positive development for the U.S. economy at the start of the last quarter of the year,” said one economist.

ISM Manufacturing Index Down: American manufacturing contracted for the eighth month in a row, a new survey showed, and there appeared to be no end in sight because of high tariffs imposed by the Trump administration. A closely followed manufacturing index slipped to 48.7% in October from 49.1% in the prior month, the Institute for Supply Management said Monday. Any number below 50% signals contraction. The ISM surveys executives every month about how their businesses are doing. And the complaints came through loud and clear: High and constantly shifting tariffs have raised costs, depressed sales and pressured companies to lay off employees.

John J. Gardner, CFP®, CPM®.AIF®

Blackhawk Wealth Advisors, Inc.

3860 Blackhawk Rd, Ste. 160 Danville, CA. 94506

Phone: 888-985-PLAN · Email: jg@blackhawkwealthadvisors.com

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For my Quarterly Market Focus podcast, click on the link below. I provide a review of global stock market highlights over past quarter and preview of the quarter ahead. Forward insights and perspectives are based on current financial market and economic trends with an emphasis on relevant developments in various areas from Fed policy to company earnings announcements.

Blackhawk Wealth Advisors is the parent corporation of Equity Research & Portfolio Evaluation and Blackhawk Asset Management. It’s Chief Investment Officer is John J. Gardner. John is a Certified Financial Planner (CFP®) and Certified Portfolio Manager (CPM®). As an AIF®, John is also an Accredited Investment Fiduciary.

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