S&P 500 Rises 0.7% as AI Expansion Funding Faces Growing Test
Key Facts
The S&P 500 rose 0.7% in Monday’s session on October 26, erasing its losses from the previous week and coming within 1.8% of its record high set earlier in the month, according to the Associated Press. The index closed at 7,676.77 points, while the Dow Jones rose 0.3% to 52,361.58 points and the Nasdaq Composite gained 0.8% to 26,169.38 points. The rebound came in a busy week for corporate earnings, as concerns focused on whether AI companies can finance data center construction and chip purchases. The Associated Press linked the stock volatility to rising borrowing costs needed for that expansion. That puts sector spending and its financial returns at the forefront of investors’ test as results arrive.
Diverging moves in chip stocks and computing operators highlighted the split within the sector. Nvidia rose 2.4%, recovering some of its losses after three consecutive weeks of declines, its longest losing streak since June, according to the Associated Press. CoreWeave shares quickly fell 5.5% after trading began, then rose 6.6% before paring gains to close up 1.8%. In the debt market, Reuters said CoreWeave bonds issued in June with a 9.675% yield fell in value, pushing yields to 15% during the week of October 12. Reuters estimated the company’s debt at about $50 billion and said the cost of insuring it against default reached about 1,200 basis points, while yields on some bonds reached 15%–16%.
The financing question extends to private credit. Reuters cited Carlyle’s estimate that the sector may be asked to provide about $1 trillion to fund AI computing expansion, more than half of its current assets. By contrast, Reuters said in a Breakingviews commentary that Meta and Anthropic are targeting up to $195 billion in equity markets, while SpaceX struck a $40 billion chip deal. These figures put expansion financing at the center of the divide between large companies able to access equity markets and computing operators that rely on borrowing. Chipmakers’ interest in buying shares in Meta’s offering also links infrastructure suppliers to financing one of their largest buyers. In an announcement reported by the Associated Press, Meta said Nvidia, AMD and Broadcom had indicated interest in buying shares worth up to a combined $5 billion, without that indicating the purchases would be completed.
Meta announced a plan on October 26 to raise $35 billion through a share sale and said it could raise an additional $60 billion after a new class of shares begins trading, according to the Associated Press. The company’s shares initially fell more than 2%, then turned higher before ending the session down 1.9%. In a separate report, Reuters said the cost of insuring Meta’s debt against default hit a record after the company raised the lower end of its annual capital expenditure forecast to a range of $135–145 billion in 2026. The five-year credit default swap index rose 7.6 basis points to a record 114.79 basis points on October 22, Reuters reported. The share price swings and financing plan came as investors assessed the cost of expanding infrastructure and its funding sources.
On corporate earnings, 24% of S&P 500 companies had reported third-quarter results through October 23, and 83% of them reported earnings per share above analysts’ estimates, according to FactSet. But reported earnings on average exceeded estimates by 2.1%, below the five-year average of 7.5% and the 10-year average of 8.0%. FactSet estimated blended third-quarter earnings growth at 29.5% on October 23, up from 29.2% the previous week and the same level recorded at the quarter’s end on September 30. On revenue, results exceeded estimates at 66% of reporting companies, while blended revenue growth stood at 12.7%. These indicators show that the overall estimate for earnings growth rose, while the average amount by which actual results beat expectations remained below historical averages.
A total of 179 S&P 500 companies are scheduled to report third-quarter results during the week of October 26, including 10 members of the Dow Jones 30, according to FactSet. Alphabet and Microsoft are due to report on Wednesday, October 28, followed by Amazon on Thursday, October 29, according to the Associated Press. Results from major technology companies carry weight amid the question raised by expansion costs: Will AI spending deliver the promised earnings and productivity? Amazon CEO Andy Jassy said most of the company’s cloud capacity for 2026 had been sold, and most of its 2027 capacity had been sold, with significant commitments extending into 2028, Reuters reported. Amazon said it expects to invest about $200 billion in capital expenditure during 2026. This week’s company results make cloud demand, spending and financial returns key areas for investors to watch.
Alongside corporate earnings, the Federal Open Market Committee is meeting on October 27 and 28, according to the Federal Reserve’s schedule. The schedule lists a press conference on October 28 at 2:30 p.m. The dates follow the market rebound and fall in a week when major technology companies’ results intersect with investors’ scrutiny of financing costs. The Associated Press had described no change in interest rates as the prevailing expectation before the meeting, not an announced decision. Attention is turning to what companies report and what the Fed says at the conclusion of its meeting.