12/10/26: SpaceX, US stocks & AI trade wobbles

Monday Espresso Podcast - 12th October 2026

[00:00:00] Rory Dowie: Good morning. Feels like Autumn is finally here in the UK. Today is Monday the 12th of October. I'm Rory Dowie, portfolio manager here at Marlborough.

[00:00:08] Rory Dowie: Joining me again today is Andrew Shaw, one of our senior investment analysts on the team. Andrew, first things first. Good morning.

[00:00:14] Andrew Shaw: Morning, Rory.

[00:00:16] Rory Dowie: A few things to cover today. Firstly, a follow up to our SpaceX special. The company has made a big move into mobile phones and it knocked billions of dollars off the big US phone networks over the week.

[00:00:27] Rory Dowie: Secondly, what's going on beneath the surface in the US stock market because whilst the index is near record highs, actually more than a third of the stocks are in a technical bear market.

[00:00:37] Rory Dowie: And thirdly, we had a bit of a wobble in the AI trade last week after a report on OpenAI's revenue.

[00:00:43] Rory Dowie: But before all that, Andrew, how did markets get on last week?

[00:00:46] Andrew Shaw: Yeah, it was a week of two halves, Rory. It started well, the S&P500 hit a fresh record high on Tuesday, helped by a weak US jobs report the prior Friday, which took some pressure off interest rates going any higher and the second half of the week turned.

[00:01:02] Andrew Shaw: Bond yields climbed higher again, oil jumped, and on Thursday, tech sold off on the OpenAI story, which we will come back to a bit later on. The NASDAQ fell 1.25% that day, which is its worst day since mid-August. And the S&P500 lost about half a percent, though both did rise again on Friday.

[00:01:21] Andrew Shaw: Over the week, Europe was the laggard again with France under real pressure. The French market hit a six month low on Thursday on worries about the French budget.

[00:01:30] Andrew Shaw: The UK was lower with banks and house builders hit by rising gilt yields. And Japan, which has been the standout this year, slipped to late in the week on those same AI doubts.

[00:01:41] Rory Dowie: Okay, so records early on in the week, then the same old pressures came through again. Higher oil and higher yields, they came back to bite sort of over that second half, as you mentioned.

[00:01:52] Rory Dowie: Moving on, I wanna spend a bit of time on the US Andrew, you mentioned the index hit a fresh high on Tuesday, but really that masks what's going on underneath the surface because the headline number is actually hiding quite a different picture.

[00:02:05] Rory Dowie: Can you give us a sense of how stocks under the surface of that index are actually performing?

[00:02:10] Andrew Shaw: As at the start of October, 182 of the 500 stocks or about 36% were 20% or more below the highest level of the past year. That's the definition of a technical bear market for an individual stock.

[00:02:25] Andrew Shaw: If you widen the lens a little bit and look at the Russell 3000, which covers almost the whole US market, roughly half of all the stocks are down 20% or more from their June highs.

[00:02:37] Andrew Shaw: The typical S&P500 stock is about 16% below its 52 week high, while the index itself is within touching distance of its record.

[00:02:46] Rory Dowie: Okay, so that's indicating that just a small part of the index then is doing well and more than offsetting the weak performance elsewhere. So I guess, in other words, something's doing the heavy lifting.

[00:02:56] Rory Dowie: Can you give our listeners an idea on actually what's doing that heavy lifting?

[00:03:00] Andrew Shaw: Two themes really AI and energy. Top 10 companies are now around 40% of the index, and nearly all of those are AI linked. Between tech and energy, those two sectors account for roughly 80% of the index earning growth. Micron and Nvidia alone are expected to contribute about a third of EPS growth this year.

[00:03:22] Andrew Shaw: And so we're seeing a handful of companies perform really well whilst the average stock is lagging and that is masking parts of the economy, which are struggling.

[00:03:32] Rory Dowie: For me, there's probably one key takeaway here for listeners. If you own a US index tracker or you have some US equity allocation, you're probably more concentrated than you might think.

[00:03:41] Rory Dowie: Roughly 40% of your money then is in about 10 companies, most of them being tied to the same AI theme. This isn't necessarily a bad thing, but it highlights the importance of understanding those drivers of those companies and those themes. Something of course we are watching incredibly closely.

[00:03:57] Rory Dowie: Moving on, Andrew, I wanted to touch on SpaceX. Listeners, you may remember our SpaceX special back in June, which we did ahead of the IPO where we said the real story wasn't about the Rockets, it was actually in the starlink business. Well, for us last Thursday. SpaceX made that point. Andrew, what happened?

[00:04:15] Andrew Shaw: Yeah, after the US market closed on Thursday, SpaceX announced it had agreed to buy a nationwide portfolio of mobile spectrum from a private equity firm called Grain Management.

[00:04:26] Andrew Shaw: Spectrum is essentially the licenced radio airwaves that phone networks use to carry calls and data, and this is what's called low band spectrum, which is valuable because it travels long distances and gets through walls. Terms weren't officially disclosed, but the Wall Street Journal reported a price of around $8 billion in cash.

[00:04:46] Andrew Shaw: Interestingly, Grain Management only bought these airwaves from T-Mobile back in August.

[00:04:51] Rory Dowie: And why does this matter then? '

[00:04:53] Andrew Shaw: Because it's the piece SpaceX needed to become a proper mobile carrier in
the US. Elon Musk called it the last critical piece of spectrum puzzle. The point is for Starlink Mobile to combine its satellites that beam signal straight to your phone with a network on the ground with a target launch date for 2027.

[00:05:13] Andrew Shaw: The same day the US regulator also approved SpaceX's application for 15,000 satellite constellation for that same mobile service.

[00:05:23] Rory Dowie: And the market reaction was quite something on the back of that news, Andrew, AT&T, Verizon and T-Mobile all fell somewhere in the region of five and 7% on Friday. And we also saw European telcos like Deutsche Telecom being off by similar amounts.

[00:05:37] Rory Dowie: Moving on, Andrew. AI, we talk about it most weeks on the podcast, but Thursday was a reminder of how much the market is leading on this one theme. What happened?

[00:05:47] Andrew Shaw: Yeah, the Financial Times reported on Thursday that OpenAI, and that's the company behind Chat GPT recently told investors its annualised revenue was nearing $50 billion.

[00:05:58] Andrew Shaw: The issue is that a figure of around 70 billion had been widely reported last month. So on the face of it, $20 billion less than people actually thought.

[00:06:08] Rory Dowie: Yeah, and you saw the market sell off on Thursday as you mentioned at the start the NASDAQ was off 1.25% and the semiconductor index or the chip makers, that fell even more.

[00:06:18] Rory Dowie: But I think there's an important nuance to point out to our listeners, isn't there?

[00:06:21] Andrew Shaw: Yeah, there is, the gap is largely about accounting. When OpenAI sells through cloud partners like Microsoft, it counts only its share of the revenue. The net figure, it's rival Anthropic counts the full amount, the customer pays the gross figure.

[00:06:37] Andrew Shaw: So the $70 billion estimate came from investors adjusting OpenAI's numbers to make them comparable with Anthropics. OpenAI also told investors its revenue grew more than 70%, so the underlying business is still growing very fast. It's more that the yard stick is different.

[00:06:55] Rory Dowie: Yeah, so again, highlighting really important to read below the headline news that we get and actually dig into the numbers.

[00:07:02] Rory Dowie: The market was spooked by the headline, but actually lifting the hood, the numbers were kind of in line with what people had expected.

[00:07:09] Rory Dowie: Finishing off. Andrew, what of our listeners got to look out for this week?

[00:07:12] Andrew Shaw: It's a big week. Third quarter earning season kicks off on Tuesday with the big
US banks, that's JP Morgan, Goldman Sachs, Wells Fargo, and Citigroup.

[00:07:22] Andrew Shaw: They'll give us a good read on the consumer and how companies are coping with higher rates. Then on Wednesday we have US inflation data for September, which lands right in the middle of the bank results. Given everything we've said about oil and yields, that will be closely watched.

[00:07:39] Andrew Shaw: And on Thursday, TSMC, the world's largest chip maker reports a useful check on AI demand after last week's wobble.

[00:07:47] Rory Dowie: Brilliant. Thanks for joining me, Andrew, very clear as always. To our listeners, hope you found that useful and as always, wishing you a great week ahead.