The stock market experienced a mixed week, with the S&P 500 and Nasdaq reaching new highs. This surge was driven by significant developments in the artificial intelligence (AI) sector, including a major partnership between OpenAI and Advanced Micro Devices (AMD), alongside optimistic projections from Nvidia CEO Jensen Huang. However, not all sectors shared in the gains, as the Dow Jones and Russell 2000 indices saw modest declines. Electric vehicle giant Tesla also made headlines by introducing more affordable versions of its popular models and releasing an updated driver-assist software.
Key Takeaways
- S&P 500 and Nasdaq hit record highs, largely due to AI sector strength.
- OpenAI formed a strategic partnership with AMD for AI chip supply.
- Nvidia's CEO expressed strong confidence in rising AI demand.
- Taiwan Semiconductor Manufacturing (TSM) reported robust September sales.
- Tesla launched lower-priced Model Y and Model 3 variants and FSD V14.
- Oracle rebounded after an initial dip from a negative profit margin report.
AI Sector Drives Market Performance
The technology-heavy Nasdaq and the broader S&P 500 indices both achieved new record closing levels this week. Investor enthusiasm stemmed from positive news surrounding AI chipmakers. Advanced Micro Devices (AMD) shares climbed significantly following an announcement of a strategic partnership with OpenAI. Nvidia (NVDA) also saw its stock rise to a new high after CEO Jensen Huang made bullish statements about the increasing demand for AI technologies.
Conversely, the Dow Jones Industrial Average and the Russell 2000 index, which tracks small-cap companies, experienced slight downturns. This indicates a divergence in market performance, with large-cap technology stocks, particularly those involved in AI, leading the overall market upward.
Market Snapshot
- S&P 500: Reached new record highs.
- Nasdaq: Also achieved new record highs.
- Dow Jones: Fell modestly.
- Russell 2000: Declined slightly.
Taiwan Semi and Nvidia Highlight Chip Demand
Taiwan Semiconductor Manufacturing (TSMC), a critical supplier for the global technology industry, reported strong financial results for September. The company's monthly revenue reached 331 billion New Taiwan dollars, or approximately $10.9 billion USD. This figure significantly surpassed analyst expectations of around 302 billion New Taiwan dollars. In local currency terms, TSMC's sales increased by 31.4% compared to the same period last year.
Despite an initial dip, TSMC shares recovered to post solid gains for the week. The company manufactures chips for leading AI firms like Nvidia and AMD, underscoring its central role in the AI supply chain. Nvidia's CEO, Jensen Huang, reinforced this trend by stating on Wednesday that AI demand is "substantially" higher now than it was just six months ago. Furthermore, Nvidia received final U.S. government approval to export billions of dollars worth of AI chips to the United Arab Emirates, further boosting investor confidence.
"AI demand is substantially higher than it was six months ago."
OpenAI Expands Chip Supply with AMD Partnership
OpenAI, a leader in artificial intelligence software, announced a significant strategic partnership with Advanced Micro Devices (AMD). This agreement provides OpenAI with a second major source for its essential AI processors, complementing its existing reliance on Nvidia. Under the multi-year, multi-generation deal, OpenAI plans to deploy 6 gigawatts of AMD AI processors. The initial phase will involve 1 gigawatt of AMD Instinct MI450 Series processors, slated for deployment in the second half of 2026.
As part of the collaboration, AMD granted OpenAI a warrant for up to 160 million shares of AMD stock. These shares will vest as specific development milestones are met. The news of this partnership caused AMD shares to surge, reflecting investor optimism about the company's expanded role in the rapidly growing AI market.
OpenAI's Strategy
Securing multiple chip suppliers is a critical move for AI companies like OpenAI. This strategy helps mitigate supply chain risks and ensures access to the high-performance hardware necessary for developing and deploying advanced AI models. Diversifying suppliers can also foster competition and potentially lead to more favorable pricing and innovation in the long term.
ChatGPT Integrates Third-Party Applications
During its annual developers conference, OpenAI showcased new capabilities for its ChatGPT AI engine. The company demonstrated how various third-party software applications can be directly integrated into ChatGPT. Initial pilot partners for this integration include major platforms such as Booking, Canva, Coursera, Expedia, Figma, Spotify, and Zillow.
However, shares of most publicly traded pilot partners saw declines after the OpenAI event. Analysts suggested that this integration could disrupt existing app store business models, creating uncertainty for companies reliant on traditional app distribution. OpenAI is offering an Apps SDK (Software Developer Kit) to facilitate the development and integration of applications within ChatGPT.
Pilot Partners for ChatGPT Integration
- Booking (BKNG)
- Canva
- Coursera (COUR)
- Expedia (EXPE)
- Figma (FIG)
- Spotify (SPOT)
- Zillow (Z)
Tesla Introduces More Affordable EVs and FSD V14
Electric vehicle manufacturer Tesla launched new, stripped-down versions of its Model Y and Model 3 vehicles. These new variants are priced at a significant discount compared to their previous base models. In the U.S. market, these lower-end EVs are still more expensive than what the base models were when the $7,500 tax credit was available, which expired on September 30.
In addition to new vehicle options, Tesla rolled out FSD V14, the latest iteration of its Full Self-Driving driver-assist software. This release comes as the National Highway Traffic Safety Administration (NHTSA) opened a new safety probe into the FSD system. Despite these developments, Tesla's stock increased by 1.6%.
Oracle Rebounds Following Cloud Profit Report
Oracle (ORCL) shares initially fell but later recovered to achieve weekly gains. This followed a report from The Information, citing internal documents, which suggested that Oracle had slim profit margins on its cloud AI training services. The report indicated that Oracle generated approximately $900 million in revenue but only $125 million in gross profit from renting cloud-based servers equipped with Nvidia chips during its August-ended quarter. It also noted that Oracle lost money on some servers utilizing Nvidia Blackwell chips.
Fox Business disputed the accuracy of the article. Analysts are now looking for further clarification on these figures at Oracle's annual customer conference, scheduled to begin on October 13.
IBM and Anthropic Form AI Partnership
IBM announced a collaboration with Anthropic, a rival to OpenAI in the artificial intelligence space. Anthropic's Claude AI large language models will be integrated into IBM's software portfolio, starting with IBM's "integrated development environment" for software development. IBM also worked with Anthropic to create a guide designed to assist enterprises in building and operating AI agents. IBM shares briefly broke out of a base on the news but ended the week with minor changes.
Delta Air Reports Strong Earnings and Outlook
Delta Air Lines reported positive financial results, with earnings per share (EPS) increasing by 14% and revenue rising by 4%. Both figures exceeded market expectations. The airline also provided an optimistic outlook for the fourth quarter. CEO Ed Bastian stated that industry fundamentals have improved, and momentum is continuing, setting up Delta for strong top-line growth, margin expansion, and improved earnings. These positive results came amid ongoing flight delays and staffing shortages at airports across the U.S., partly due to a government shutdown. Delta's stock jumped on the earnings announcement but later pared some of its gains.
Space Sector Sees Significant Activity
Several companies in the space sector experienced notable gains this week. Rocket Lab (RKLB) saw its shares rally by over 18%, extending its record highs. This surge followed a new multi-launch agreement with Japan-based satellite manufacturer Institute for Q-shu Pioneers of Space (iQPS). Under this deal, Rocket Lab will be the primary launch provider for iQPS's commercial Earth-imaging constellation, including three missions scheduled no later than 2026. iQPS currently has a total of seven upcoming launches with Rocket Lab.
AST SpaceMobile (ASTS) also climbed more than 20% after announcing an agreement with Verizon (VZ). Starting in 2026, AST Space will provide direct-to-cellular service to Verizon customers as needed. AST SpaceMobile is a competitor to other space-based cellular providers, such as SpaceX's Starlink, which offers a text-only service with T-Mobile (TMUS).
In related news, the U.S. Space Force awarded over $1 billion in launch contracts last Friday for seven military missions set to begin in 2027. SpaceX received $714 million for five launches, while the United Launch Alliance (ULA), a joint venture between Lockheed Martin (LMT) and Boeing (BA), secured $428 million for two launches.
Briefs from the Stock Market
- Verizon Communications (VZ): Dan Schulman, former PayPal (PYPL) CEO, was named the new CEO in a surprise announcement. Shares of Verizon, AT&T (T), and T-Mobile (TMUS) all declined.
- Spruce Biosciences (SPRB): The stock skyrocketed almost 1,400% after its drug for Sanfilippo syndrome type B, a rare neurological disorder, received breakthrough designation from the Food and Drug Administration.
- Fifth Third Bancorp (FITB) and Comerica (CMA): Fifth Third Bancorp announced an all-stock deal to acquire Comerica for $10.9 billion. Fifth Third's stock fell, while Comerica's jumped over 13.5%.
- AppLovin (APP): Shares plunged after Bloomberg reported that the Securities and Exchange Commission (SEC) is investigating the mobile advertising technology company's data collection practices.
- Dell Technologies (DELL): The company increased its long-term sales and earnings growth estimates, citing strong demand for AI computers. Dell's stock rose.
- Ferrari (RACE): The Italian sports car manufacturer's shares dropped after it lowered its long-term forecasts and reduced its 2030 electric vehicle targets.