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October 29, 2025

Good morning. Andrew here. On tap today: We’re watching for earnings from Alphabet’s Google, Meta and Microsoft — and how much they continue to spend on A.I. — and we’re most likely going to hear the Federal Reserve cut rates by a quarter point later today.

Also, China reportedly bought soybeans from the U.S. for the first time in months before President Xi Jinping’s meeting with President Trump, perhaps presaging a deal. We go deep this morning on OpenAI’s next chapter with Microsoft. And we’ve got some reaction to Bill Gates’s comments on climate change. (Was this newsletter forwarded to you? Sign up here.)

The stock market has hit record after record, a run that could be tested with Big Tech earnings on tap. Brendan Mcdermid/Reuters

The A.I. rally’s big test

The S&P 500 looks set to extend its record-setting gains this morning as investors brace for what many view as the most pivotal two-day stretch of earnings season.

Meta, Microsoft and Google’s Alphabet report results after the closing bell today. Apple and Amazon go tomorrow. Wall Street again has sky-high expectations for this quintet, which have ridden a wave of investor exuberance over artificial intelligence into a combined valuation of more than $15 trillion.

But there are big questions, too. The A.I. race is proving costly, and the early returns have been elusive. And for tech C.E.O.s, those bubble questions won’t go away. (Jensen Huang, the C.E.O. of Nvidia, the chipmaker at the center of the A.I. boom, swatted one away just yesterday.)

Consider these numbers: Going by corporate announcements and analyst forecasts, Amazon, Microsoft, Google and Meta alone are expected to spend roughly $350 billion this year (or in the current fiscal year) on A.I.-related capital expenditures. Much of that is on the development of A.I. data centers, which require staggering amounts of electricity. To beef up the surrounding grids, Google, Microsoft and others have been striking partnerships with utilities to bring in the needed power.

A fascinating data point: Many economists credit A.I. spending with bolstering the overall economy. “In the first half of this year, A.I.-related capital expenditures contributed 1.1 percent to G.D.P. growth, outpacing the U.S. consumer as an engine of expansion,” Stephanie Aliaga, a strategist at J.P. Morgan Asset Management, wrote in an investor note last month.

A.I. bulls see more room for growth. Goldman Sachs recently forecast that listed U.S. companies would spend less on share buybacks this year, potentially plowing the money instead into A.I.

That said, investors will want to know: Will the tech giants keep up this spending pace? Is it justified by market demand? And will America’s energy grid hold up?

Overall, S&P 500 companies are forecast to spend $1.2 trillion on capital expenditures this year, a record level that has been partly driven by the A.I. boom, according to Trivariate Research. But a good chunk, or about 30 percent, will come from the nine biggest companies listed on the benchmark index, the firm added.

In other words, Big Tech is the biggest spender.

Hurricane Melissa bears down on Cuba. After slamming into Jamaica as one of the strongest Category 5 storms on record, Melissa hit Cuba early today with winds of more than 100 miles per hour. Meteorologists fear widespread damage after Melissa decimated the power and communications infrastructure in Jamaica, cutting off many parts of the island as internet connectivity collapsed to 30 percent of normal levels.

How low will the Fed go? Investors see an almost 100 percent chance that Jay Powell, the Fed chair, will announce another quarter-point interest rate cut after the central bank’s meeting wraps up today. But future reductions are unclear, as policymakers deal with a kind of data blackout resulting from the government shutdown. Another big question: What will the bank say about its plans to reduce parts of its portfolio of Treasury notes, bonds and other securities?

The Senate rebukes President Trump on his Brazil tariffs. Some Republican senators crossed party lines to reject the emergency declaration that Trump had used to justify the 50 percent levies he imposed on Brazil. The resolution faces long odds in the House, but it signals growing bipartisan frustration with some tariffs. In other trade news, South Korea said it had reached an agreement during Trump’s visit with President Lee Jae Myung that would lower tariffs to 15 percent from 25 percent.

OpenAI’s new look

One of the burning questions about OpenAI’s future appears to have finally been answered — and it could pave the way for the artificial intelligence company and its investors to cash in.

Here’s the latest: OpenAI announced yesterday that it had adopted a for-profit corporate structure. The move gives investors, including Microsoft, the company’s primary early backer, a significant minority stake.

The news propelled the software giant back into the $4 trillion valuation club. It also gives SoftBank the all-clear to proceed with the full $30 billion investment into the ChatGPT maker that it had agreed to in March, a war chest needed to keep its edge in the highly competitive A.I. race.

A fascinating other tidbit: Sam Altman, the OpenAI co-founder, will get a relatively small stake.

The start-up is structured as a public benefit corporation controlled by its nonprofit arm, akin to how other A.I. rivals are governed.

The new structure will make it easier to offer stakes to investors. OpenAI has now fully dropped its complicated “waterfall” model that caps profit from new investors, Lauren Hirsch reports. The corporate transformation also rekindled the buzz around a potential I.P.O.

The company also rejiggered the nonprofit that has controlled OpenAI since it was founded — an especially thorny question for investors who watched as OpenAI’s valuation jumped more than sixfold to $500 billion in the past two years.

Under the new structure:

(During negotiations, the nonprofit board was advised by Goldman Sachs and Michael Klein, and Microsoft was advised by Morgan Stanley.)

Home state advantage? The Wall Street Journal reported that the company overcame a big negotiating hurdle by agreeing to stay in California, and expand there. Altman made the promise to Rob Bonta, the state’s attorney general, who has clashed with OpenAI over concerns that the company wasn’t living up to its nonprofit mission and over the company’s perceived lack of safety guardrails for teenage users.

Trump’s other chips dilemma

On the eve of high-stake talks between President Trump and China’s top leader, Xi Jinping, a key detail may have just been revealed, and it involves Nvidia.

“We’ll be speaking about Blackwells,” Trump said on Air Force One as he headed to South Korea, referring to the chipmaker’s cutting-edge artificial intelligence chip that has been caught in the middle of the Beijing-Washington trade fight.

That helped send shares in Nvidia higher in premarket trading.

But there’s a much smaller chipmaker — Nexperia, and its Chinese parent, Wingtech — that the auto industry will be closely watching in the negotiations, Grady McGregor reports for DealBook.

A recap: Under U.S. pressure, the Dutch government recently seized Nexperia, Wingtech’s European subsidiary whose low-cost semiconductors power things like airbags and window wipers. The move — which was also reportedly driven by fears that chipmaker may be planning to pull out of Europe — prompted Beijing to ban Nexperia’s Chinese unit from exporting the chips to many Western customers.

The fallout: Auto industry groups in both Europe and the U.S. are warning of looming factory shutdowns, and Germany is bracing for a potential 30 percent drop in car production.

Beijing is trying to send a bigger message, analysts say. It is willing to play hardball to protect its ever-expanding overseas business interests. “China’s strong reaction is logical because this can happen with other subsidiaries of Chinese companies,” said Alicia Garcia-Herrero, the chief economist for the Asia-Pacific region at the French investment bank Natixis.

Beijing is also keen to show its willingness to hit back at Washington over its use of non-tariff trade tools, such as export controls and placing companies like Wingtech on a kind of blacklist, or entity list. (Both countries have put thousands of companies on entity lists in recent years, showing the increasing weaponization of this kind of trade tool.)

That doesn’t mean a deal is off the table. China still wants to maintain close economic ties with Europe, where this dispute is centered. But a Dutch takeover or reverting to the old Chinese ownership structure seem untenable, analysts said.

In the meantime, automakers have little certainty about the fate of a key supplier. “This is at the top of the agenda of lobbyists working on behalf of the U.S. auto industry,” Michael Dunne, who runs the auto advisory group Dunne Insights, told DealBook.

More reaction to Gates’s climate ‘pivot’

Yesterday, we broke down Bill Gates’s eye-opening memo calling for a rethink on climate change policy that he said focused too much on emissions. He called for a “strategic pivot” on how to address risks posed by a warming planet, and took a swipe at what he said was the “doomsday” thinking that too often pervades the debate.

The memo has created a stir among some climate scientists.

Tom Steyer, the hedge fund mogul and climate investor, told DealBook that he took issue with Gates’s assertion that “although climate change will have serious consequences — particularly for people in the poorest countries — it will not lead to humanity’s demise.”

Steyer said:

I understand the instinct to reassure, especially in a tense political moment. But reassurance shouldn’t blur reality. Right now, China is proving that clean-energy deployment can move faster than anyone imagined, and Jamaica is confronting the human cost of delay. As investors, our job is to see the world as it is — and the energy transition continues to be a necessity from the standpoint of global competition, national security and environmental safety.

But the two aren’t all that far apart on where investors should be putting their money. As Gates wrote: “We need more innovation in renewables, transmission, and other ways to generate and store electricity.”

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