Weekly Investment Update (10/31/2025)

Earnings season continued this week, with Big Tech dominating both headlines and investor sentiment. Amazon’s AWS growth accelerated to 20%— its fastest pace in nearly three years. Apple’s upbeat December-quarter guidance, projecting revenue growth of 10%–12%, reinforced optimism that consumer demand remains resilient, particularly in iPhones and services. Broader AI enthusiasm surged again, driven by Nvidia’s report of a staggering $500 billion AI backlog and expanding industry partnerships. Alphabet, Microsoft, and Meta underscored this trend through their massive capital spending commitments — nearly $80 billion combined last quarter, up almost 90% year over year — fueling both optimism about long-term productivity gains and caution over potential excess. The takeaway: AI remains the dominant driver of corporate investment, with implications for sustained demand in semiconductors, data centers, and industrial infrastructure.

Meanwhile, the macro backdrop remains nuanced. The Federal Reserve’s October meeting delivered the expected 25 basis-point rate cut, but post-meeting commentary struck a hawkish tone. Fed officials emphasized inflation’s persistence and questioned the need for additional near-term easing. Market pricing now implies roughly a 70% probability of another cut in December, though that expectation could shift quickly with incoming labor and inflation data. For investors, a mix of robust AI-driven earnings, cautious central bank rhetoric, and seasonal tailwinds into year-end supports a constructive but selective stance — Bessemer portfolios continue to emphasize high-quality growth and companies with exposure to the AI infrastructure buildout, while maintaining disciplined-but-opportunistic exposure in areas like high-end consumer brands and healthcare.

Fed Cuts 25 Basis Points, Ends Quantitative Tightening, and Pushes Back on December Cut Certainty

What is happening: The Federal Open Market Committee (FOMC) lowered the target range for the federal funds rate by 25 basis points to 3.75%–4.00%. The statement noted downside risks to employment “rose in recent months,” suggesting the limited labor data available during the ongoing government shutdown point to continued softening.

However, in his press conference, Chair Powell struck a notably hawkish tone, emphasizing a December rate cut was “far from a foregone conclusion.” The Fed remains data-dependent, though Powell acknowledged that limited visibility due to the government shutdown complicates policy decisions. He likened the uncertainty to “driving in the fog,” noting both caution and patience could justify inaction in December if data remain unavailable.

While Powell acknowledged tariffs are adding modestly to core inflation, Powell noted that underlying inflation excluding tariffs is closer to 2%, and much of the strength in “supercore” inflation comes from nonmarket sectors the Fed views as less policy sensitive. The Fed also announced quantitative tightening (QT) will conclude on December 1, with principal payments from mortgage-backed securities reinvested into Treasury bills, a signal of a more accommodative stance on liquidity.

Why it matters: An unexpected dissent in favor of holding rates steady and Powell’s remarks cautioning against assuming another cut in December weighed on market expectations for further easing. Market-implied odds of a December cut fell from nearly 90% before the meeting to under 70% afterward.

Despite the Fed’s incrementally hawkish tone, we continue to expect an additional 25 basis-point cut in December as labor market weakness becomes clearer once economic data releases again become available. For investors, the near-term message is one of modest easing paired with policy restraint.

We maintain a longer-duration-than-benchmark stance in fixed income portfolios, consistent with expectations of slower growth, stabilizing inflation, and additional Fed accommodation over the coming months.

Third-Quarter Mega-Cap Company Earnings Reveal Uneven Investor Sentiment

What is happening: Third-quarter earnings season is off to another strong start with over 60% of S&P 500 companies having reported so far. Currently, the blended year-over-year (yoy) earnings growth for the quarter stands at 10.5%, up from 7.9% at the end of Q3, driven mostly by strong gains in technology and communication services. The earnings beat rate of 82% is also above long-term averages in the mid-70% area.

The big technology companies that reported this week — Alphabet, Amazon, Apple, Meta, and Microsoft — all delivered top- and bottom-line beats, but experienced differentiated stock price movements. Alphabet reported strong earnings growth driven by 30%-plus sales growth in Google cloud along with a $155 billion order backlog, and the stock jumped after hours. Likewise, Amazon saw a major bounce after reporting 20%-plus growth in its Amazon cloud business. Apple shares rallied after reporting iPhone revenue of over $49 billion, representing a 6% yoy growth rate, with services revenue, which includes software, subscriptions, and digital content, reaching an all-time high of $28.7 billion.

In contrast, Microsoft’s and Meta’s stock prices fell despite strong earnings performance, largely driven by announcements of increased artificial intelligence (AI) related capital expenditures. Meta’s shares fell around 10% in after-hours trading following the company’s earnings report, largely driven by upward revisions to capital expenditure (capex) and expense forecasts for 2026.

Why it matters: Overall, this week’s results reinforced some ongoing themes for the earnings season. AI and cloud investment remain the focal points of companies’ outlooks, and there is increased scrutiny around expectations for returns on investment. In the case of Microsoft and Meta, market participants seemed less forgiving of higher spending without clear translations to additional revenues.

Another theme is that tech leadership is now becoming less homogeneous. Amazon’s strong results led to a rebound for a company that had lagged so far this year. Apple’s earnings showed that there is still robust demand for premium hardware and services. When these results are taken together, it’s an important reminder that there is wide differentiation in business models among the Big Tech companies.

From a macro standpoint, the combination of these results and subsequent price movements are a reflection that investor expectations around the AI growth narrative have adjusted to place more emphasis on operational detail and cost management. However, this is not necessarily a negative development. If the broader tech sector can improve forward-looking discipline, then this could create a positive feedback loop that further supports the equity markets. Additionally, heavier focus on costs could help improve operating margins in the long run. However, if near-term return metrics continue to disappoint, there could be a period of consolidation in the industry. Either way, this week’s results highlight how Big Tech is not a monolithic bloc, and there will likely be further dispersion in performance across these companies.