“Travel and change of place impart new vigor to the mind.” — Seneca
Chart of the Day
Good morning!
The AI trade needs no introduction to followers of Fundstrat’s work. In recent years, market observers have seen the stock prices of AI-related companies like Nvidia, Microsoft, and Palantir soar, often setting records along the way. This price action is tied to hopes that ever-emerging advances will yield technologies that are useful, ubiquitous, and of course, profitable.
Many countries also view AI advances as strategically important – critical, even – to their long-term futures. The resulting competition has resulted in a fierce rivalry.
As any sports fan will tell you, a rivalry really only emerges when both sides have a realistically high likelihood of winning. Contention between a perennial contender and a competitor that’s always at the bottom of the standings or league table does not constitute a rivalry. No Yankee fan cared about the Red Sox in the mid-1960s – not very much, anyway.
The best and brightest in Silicon Valley are paying close attention to what their rivals around the world are doing. So are policymakers in Washington, D.C.
To us, this suggests that investors interested in AI shouldn’t just focus on the U.S. companies mentioned above – not if they want to cover their AI bets, anyway.
China’s Alibaba (BABA -3.68% ), Baidu (BIDU -3.85% ), and Tencent (TCHEHY) shares have each notched gains in recent days, driven to various extents to disclosures about Alibaba’s plans to further increase spending on AI research and development, over and above levels it announced in February. But even before this week (as of market close Sept. 25), the companies’ shares were up 107%, 61% and 55% YTD, respectively. All three have developed their own respective series of Large Language Models (Baidu’s Ernie Bot is arguably the most popular chatbot in China), and Alibaba and Baidu are also aggressively investing in developing their own AI chips.
The AI race isn’t just about the U.S. and China, of course. Samsung Electronics (SSNLF) is arguably a prominent competitor in efforts to integrate AI with hardware (not surprisingly, given its consumer electronics presence). Samsung is also contending with SK Hynix and with U.S. rival Micron Technology (MU 4.27% ) in the development of high-bandwidth memory (HBM) chips used in high-performance applications like AI, and the South Korean conglomerate’s advanced foundry operations are second only to Taiwan Semiconductor Manufacturing Co. (TSMC) – albeit a distant second.
And though the name is likely familiar to many in the U.S., Japan’s Softbank (SFTBY) (up 124% in 2025 as of Sept. 25) has become a prominent player in the AI space. Though the company does not directly develop or research AI technology, the company is, as founder Masayoshi Son puts it, “all in” on AI. Its Stargate partnership with OpenAI and Oracle, its majority stake in British chip designer Arm Holdings, and its stakes in multiple chip companies (Nvidia, Intel, Ampere Computing, etc.) all illustrate an approach to AI that goes beyond U.S. borders.
The competition to push the envelope for AI advances is undeniably global. Investors looking to trade this competition might want to consider more than just the U.S.
Share your thoughts
Have you invested in (or are you considering an investment in) non-U.S. AI companies? Click here to send us your response.
📧✍️Here’s what a reader commented📧✍️
Q: Is gold a part of your portfolio?
A: Gold and Silver miners have been a significant weight in my portfolio since Q4 ’24. Gold miners all in sustaining costs are running around $1800/oz. So their margins at $3800 selling price is $2k Free cash flow generation has exploded . Central bank buying is underpinning demand. Dollar depreciation and trade barriers enhance the value of the commodity as a reserve asset. In an increasingly uncertain world gold has increasing appeal.
Catch up with FS Insight
We have been in Seoul this week meeting with investors. To us, it seems like many have expressed concerns about a possible market top given the weakness in AI stocks this week. But low conviction is rarely a sign of a top and we believe equities have more room to gain before a local top.
Technical
Pullback should not have much downside, and I’m skeptical that September lows are violated. Healthcare has turned down sharply and looks to weaken further, but for those forced to put money to work in healthcare, it’s important to show that biotechnology’s recent comeback makes this one of the more attractive sub-sectors within the healthcare sector.
Crypto
About $18B in open interest has been flushed. Leverage is still elevated but improving, and one more flush is possible before conditions stabilize.
News We’re Following
Breaking News
- Stock futures rise after in-line PCE inflation report CNBC
Markets and economy
- Trump to put import taxes on pharmaceutical drugs, kitchen cabinets, furniture and heavy trucks AP
- Beijing launches investigation into Mexican tariffs on Chinese imports SEM
- Bessent puts U.S. money at risk in $20 billion Argentina backstop BBG
- Trump takes aim at chip makers with new plan to throttle imports WSJ
Business
- Trump signs TikTok deal SEM
- Amazon to pay $2.5 billion in prime membership settlement NYT
- Costco tops earnings, revenue estimates as warehouse club gains more members CNBC
Politics
- Former FBI Director Comey charged amid Trump retribution push BBG
- Fed independence reaches its moment of truth as Supreme Court weighs Cook’s fate WSJ
- ‘They will pay a huge price for this’: Shutdown-ready Trump expects Democrats to blink POL
- Justice Department lays groundwork for probes of Soros-funded group WSJ
Overseas
- Greece extradites oligarch to Moldova in $1bn fraud case BBC
- Diseases ravage war-torn Sudan as conflict rages on SEM
- Microsoft cuts off some services used by Israeli military unit BBC
- Nicolas Sarkozy sentenced to 5 years in prison in Libya corruption trial FT
Of Interest
- NASA introduces its latest astronaut class AP
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| Date | Time | Description | Estimate | Last |
|---|---|---|---|---|
| 9/26 | 8:30AM | Aug PCE m/m | 0.3 | 0.2 |
| 9/26 | 8:30AM | Aug Core PCE m/m | 0.2 | 0.27 |
| 9/26 | 8:30AM | Aug PCE y/y | 2.7 | 2.6 |
| 9/26 | 8:30AM | Aug Core PCE y/y | 2.9 | 2.87723 |
| 9/26 | 10AM | Sep F UMich 1yr Inf Exp | 4.8 | 4.8 |
| 9/26 | 10AM | Sep F UMich Sentiment | 55.4 | 55.4 |
| 9/30 | 10AM | Sep Conf Board Sentiment | 95.75 | 97.4 |
| 9/30 | 10AM | Aug JOLTS | 7100.0 | 7181.0 |
| 10/1 | 9:45AM | Sep F S&P Manu PMI | n/a | 52.0 |
| 10/1 | 10AM | Sep ISM Manu PMI | 49.2 | 48.7 |
| 10/2 | 10AM | Aug F Durable Gds Orders | n/a | 2.9 |
