Amazon Surges, Meta Sinks: The AI Spending Test

Fresh news and strategies for traders. SPY Trader episode #1413. Megacap tech powered the S&P 500 and Nasdaq to strong October gains, largely ignoring the cautious Fed rate cut and the ongoing government shutdown. While Amazon soared on robust cloud growth, Meta plunged after announcing staggering AI capital expenditure plans, signaling investor concern over margin impact. We detail why the relentless AI capex boom continues to dominate the market narrative and offer strategies for positioning your portfolio, recommending an overweight tilt toward QQQ/XLK and caution in longduration bonds like TLT.

Episode Transcript

(00:00):
Welcome back to Spy Trader .
I'm your host , Barry Bullish , waking up bright and early .
It's 6 am on Saturday , November 1st , 2025 , Pacific time , and we are diving straight into the endofweek action .
What a close to October !
The market managed to largely ignore a lot of macroeconomic noise , thanks entirely to the sheer strength of the megacap tech giants .

(00:23):
The major indices closed the week and the month of October with solid gains .
The Nasdaq Composite , proxied by the Invesco QQQ Trust , had the strongest performance , surging 2.2% for the week and closing at a new record high , significantly outperforming the broader SPDR S&P 500 ETF Trust , SPY .

(00:46):
This strength was highly concentrated in sectors like Consumer Discretionary , driven almost entirely by Amazon , and Technology , fueled by AI infrastructure spending .
We also got the widely anticipated Federal Reserve rate cut of 25 basis points , moving rates into the 3.75% to 4.0% range .

(01:09):
However , Fed Chair Jerome Powell warned that further easing is 'not a foregone conclusion , ' which pushed bond yields higher , causing the 10year Treasury yield to rise and likely putting pressure on instruments like the iShares 20 Year Treasury Bond ETF , TLT .
Adding to the macro uncertainty , the partial federal shutdown has entered its second month , creating a ' data vacuum ' by delaying key economic reports like the CPI and the official jobs report .

(01:41):
The real engine driving the SPY higher was corporate earnings and the massive capital expenditure boom in AI .
Amazon was a huge catalyst , surging nearly 10% after its Q3 results showed its critical cloud unit , AWS , jumped 20% , its fastest growth since 2022 .

(02:03):
This relentless appetite for AI infrastructure also helped push Nvidia to become the world's first 5 trillion company .
However , the market revealed its line in the sand with Meta Platforms .
Despite beating estimates , Meta shares fell sharply — over 10% on one day — after the company raised its 2025 AI capital expenditure forecast to a staggering 70 to 72 billion , with an even ' notably larger ' spend anticipated for 2026 .

(02:37):
This spooked investors concerned about margins .
The overarching insight here is that the market is willing to tolerate macro uncertainty , like the cautious Fed and the government shutdown , because the dominant growth story in technology , which accounts for over 50% of the S&P 500's total earnings growth , remains absolutely intact .

(03:00):
For your portfolio , we are still seeing narrow breadth , meaning few stocks are driving the overall indices like SPY .
Our first recommendation is to maintain your core US equity exposure using a diversified largecap ETF like Vanguard S&P 500 ETF , VOO , to capture the robust S&P 500 earnings while mitigating singlestock risk .

(03:26):
Second , overweight the sectors leading the charge .
This means tilting toward the Invesco QQQ Trust or the Technology Select Sector SPDR Fund , XLK .
These instruments directly benefit from the continued AI and cloud capex boom , exemplified by the massive outperformance of Amazon , AMZN .

(03:48):
Finally , on the fixedincome side , be cautious .
Since the Fed tempered rate cut expectations , longerduration bonds like TLT are inherently risky as yields rose .
We recommend sticking to a moderateduration instrument like the iShares Core U.S.
Aggregate Bond ETF , AGG , which offers more diversification than longterm Treasuries alone Remember , watch Meta Platforms closely ; its sharp decline shows the market is demanding that massive AI spending eventually translates into profit , not just promise .