AI boom faces a test: US midterm elections, October nonfarm payrolls, and Apple and AMD earnings arrive next week

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After tech stocks recently suffered a concentrated sell-off, US stocks will face a series of important tests next week. The US midterm elections, the October nonfarm payrolls report, and earnings from large tech companies such as Apple and AMD will arrive in quick succession, and investors will reassess the impact of AI investment returns, the monetary policy outlook, and changes in the US political landscape on financial markets.

This week, AI-related stocks remained under pressure. Third-quarter earnings from Google parent Alphabet and Amazon intensified market concerns about the huge data center spending and investment returns of tech giants. In addition, Intel's guidance came in below expectations, causing its shares to plunge nearly 29% on Friday and further intensifying selling pressure on tech stocks.

Dragged down by tech stocks, the S&P 500 fell 0.57% this week, the Nasdaq fell 2%, and the Dow fell 0.85%. On Friday alone, the S&P 500 fell 1.8% and the Nasdaq fell 2.9%.

Marta Norton, chief investment strategist at Empower, said market unease stems mainly from persistent and even intensifying AI concerns, and investors are still digesting the information conveyed by this week's earnings.

However, performance within US stocks diverged. As tech stocks were sold off, funds rotated into defensive sectors such as health care and consumer staples. In October, sectors including energy, financials and utilities all posted solid gains.

Midterm elections and nonfarm data become market focus

The US midterm elections will be held on November 3 (next Tuesday). The market widely expects Democrats to have a chance of winning control of the House of Representatives, but control of the Senate remains highly uncertain.

As public opposition grows over data centers' energy consumption, electricity costs and environmental impact, investors are closely watching whether the election results will bring stricter regulatory scrutiny. Market participants believe that if Democrats win both chambers of Congress, the AI industry, especially data center construction projects, could face stricter regulatory review.

Francesco Pesole, FX strategist at ING, noted that a sweeping Democratic victory could be slightly negative for the dollar, due to factors including a higher risk of government shutdown, possible deadlock in debt ceiling negotiations, and a further blow to already fragile AI market sentiment.

But some market participants believe the election's impact on the stock market may be limited. Mark Malek, chief investment officer at Siebert Financial, said the election could trigger market volatility, but other more important macro factors are currently dominating the stock market.

In addition to the midterm elections, the US October nonfarm payrolls report to be released next Friday is also a market focus.

FactSet data show the market expects US nonfarm payrolls to increase by 55,000 in October, up from 29,000 in September, with the unemployment rate expected to remain at 4.2%.

Matthew Miskin, co-chief investment strategist at Manulife John Hancock Investments, said the missing link in the current narrative of strong US economic growth is insufficient job growth.

The Federal Reserve kept interest rates unchanged this week while upgrading its assessment of US economic conditions. According to London Stock Exchange Group (LSEG) data, as of Friday, money markets priced a 76% probability that the Fed will raise rates by 25 basis points on December 9, and had fully priced in at least two rate hikes over the next 12 months.

Before the nonfarm report is released, next Tuesday's JOLTS job openings data, Wednesday's ADP employment report, and the ISM manufacturing and services indices will provide investors with more clues for judging the US economic and interest rate outlook.

Overseas, the Bank of England is expected to raise rates next week, and the Reserve Bank of Australia is also widely expected to implement its fifth rate hike this year. EM_StockImg_Start

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Earnings from tech giants such as Apple and AMD arrive in succession

Corporate earnings are also a key market focus next week. More than 130 S&P 500 companies will report results next week, including Apple, AMD, Palantir, Qualcomm, Uber and McDonald's.

Overall, third-quarter US corporate earnings remain strong. LSEG data show that with more than half of S&P 500 companies having reported, overall earnings are expected to grow 31.6% year on year.

However, the market's bar for corporate earnings is also rising. The latest FactSet data show that although 82% of companies that have reported beat earnings per share expectations, the overall margin of earnings beats was only 1.9%, far below the five-year and 10-year averages of 7.5% and 8%, respectively.

Chris Galipeau, chief market strategist at the Franklin Templeton Institute, said market expectations for corporate earnings are set very high, and companies that fail to meet or exceed that bar are easily punished by investors.

After a series of sell-offs in large tech companies, Apple's earnings next Monday are particularly critical. So far this year, Apple shares have risen about 28%, making it the best performer among the "Magnificent Seven" tech giants, and its market value is approaching Nvidia's.

However, Bank of America removed Apple from its best investment ideas list on Friday. Analyst Wamsi Mohan believes the phased iPhone launch and rising component costs could pressure the company's gross margin, but maintained a "Buy" rating on Apple.

In addition, results from companies including AMD, Palantir and Qualcomm will provide investors with more basis for assessing AI chip demand, enterprise AI applications and the investment outlook for the tech industry.

Although the AI trade faces adjustment pressure, some investors remain optimistic about US stocks. Historical data from the Stock Trader's Almanac show that in US midterm election years, November is usually the best-performing month for the Nasdaq, with an average gain of 3.5%.

(Next week's earnings highlights)

Overview of major overseas economic events next week (Beijing time):

Monday (November 2): US October ISM manufacturing PMI, US October S&P Global manufacturing PMI final reading, France/Germany/euro area October manufacturing PMI final readings, UK October manufacturing PMI final reading

Tuesday (November 3): 2026 US midterm elections, US September JOLTS job openings, Reserve Bank of Australia interest rate decision and monetary policy statement

Thursday (November 5): Bank of England interest rate decision, meeting minutes and monetary policy report, US October global supply chain pressure index

Friday (November 6): US October seasonally adjusted nonfarm payrolls, US October unemployment rate

(Source: Cailian Press) Mid-article body embedded advertisement