Personal Wealth Management Monday Espresso Podcast

Monday Espresso Podcast - 13th October 2025

[00:00:00] Nathan Sweeney: Good morning everybody. It is Monday the 13th of October, and I'm really pleased to be joined by Rory Dowie, Portfolio Manager on our personal portfolios. Good morning, Rory.

[00:00:11] Rory Dowie: Good morning, Nathan. Great to be back.

[00:00:13] Nathan Sweeney: So Rory, how were markets performing last week?

[00:00:16] Rory Dowie: After a fairly subdued four and a half days last week, the key event was on Friday afternoon. There we saw a re-escalation of the trade tensions between the US and China, which seemed to send shockwaves through markets across the board. Trump came out on Friday afternoon and suggested that he may hike tariffs again on imports from China starting on November the first.

[00:00:32] Rory Dowie: And again, over the weekend we saw China responding in a pretty resilient manner. What this meant is that investors became quite scared again, of just rising global trade tensions. A nd you know, what that might mean for a new round of tariffs, a gain, increased potential costs for consumers and businesses.

[00:00:48] Rory Dowie: From our perspective, we think this is probably both size preparing for the next round of trade talks more than anything and we don't think it's anything too substantial at this stage, and you can see that kind of in the pre-market today on Monday, however, on Friday afternoon, we did see markets nose dive in the US actually had its worst day since April.

[00:01:04] Rory Dowie: And the US finished down about two and a half percent for the week. O ther than that, I think there's one other market to mention and that was Japan. T he Nikkei 225, representing those top 225 stocks in Japan rose just over 5%. And that was on the back of the news that Sanae Takaichi, I hope I pronounce that right, was elected the new leader of the ruling Liberal Democratic Party. We also did see some quite major stock moves under the surface.

[00:01:30] Rory Dowie: We had spoken over recent weeks about, you know, the speed of AI deals between some of these AI geared companies. And this week it was a turn of AMD or Advanced Micro Devices and they signed a deal with OpenAI, which actually led to AMD rising 40% over the week.

[00:01:44] Nathan Sweeney: Yeah, so got very interesting moves there in Japan.

[00:01:47] Nathan Sweeney: And a lot of people have been talking about Japan a lot more constructively. I know we have as a team, so you know, can you delve into Japan a little bit? Tell us why people are getting excited about Japan at the moment.

[00:01:58] Rory Dowie: Yeah, so Takaichi was a close friend of the ally and late Prime Minister Shinzo Abe, and she's an advocate essentially of loose monetary policy and expansionary fiscal policy.

[00:02:07] Rory Dowie: So her kind of election as the new party leader. Of the kind of Liberal Democratic Party, it was positive and investors took that positively. And what that might mean for the prospect of continued low interest rates in Japan, you know, keeping those borrowing costs low and the potential for more economic stimulus to boost that kind of historically sluggish Japanese economy and try and boost those real wages for workers.

[00:02:29] Rory Dowie: So really it was a stock markets getting ahead. The potential for those policies and the move on Monday really kind of echoed that. Having said that on Friday, Japan's governing coalition collapsed as talks between Takaichi and the opposing party ended, and that raised doubts as to whether the minority government could actually be formed.

[00:02:47] Rory Dowie: A lot of disagreement was around the desire for the Liberal Democratic Party to do more, to regulate some of those political donations that they, you know, got into trouble with in the past, and again, still to be seen if this minority government can be formed. Having said that, markets still think it probably can.

[00:03:01] Rory Dowie: Japan finished 5% up for the week. Clearly we'll be watching that closely, but you know, as Nathan alluded to, we are getting kinda more positive on Japan as Marlborough in the multi-asset team.

[00:03:10] Nathan Sweeney: Actually it's an area we have done a lot of work on and a lot of people are very constructive on Japan because you're seeing corporate earnings improve and it's not as expensive as areas like the US.

[00:03:22] Nathan Sweeney: There's a lot of reasons to be positive about Japan and couple that with this change in dynamic at a political level. But you know, a lot of the focus has really been on the spate of deals that we've seen in the marketplace. So we're moving more towards this transactional environment. A lot of big deals are being done, so we're seeing some continued news on that side.

[00:03:43] Nathan Sweeney: So what's your take on it?

[00:03:45] Rory Dowie: As you said, Nathan spate of deals, and actually this week it was the turn of AMD. They had an agreement with OpenAI, the creators of ChatGPT. You may recall that you know the last couple of weeks, OpenAI were already penned large deals with both Nvidia and Oracle. And this turn it was AMD.

[00:04:02] Rory Dowie: They're probably NVIDIA's closest competitor, really. We know, within that sort of tech innovation side on the AI front, what was the deal about? So AMD agreed to supply six gigawatts of GPU, so semiconductor chips, just to put that in context. Six gigawatts is the same, well enough to power 5.3 million homes.

[00:04:21] Rory Dowie: London for context, has about 3.5. And so really, really huge deal here for AMD. And in return, AMD have basically issued a warrant allowing OpenAI to purchase up to 10% of AMD common stock. And that warrants based on the AMD stock price hitting certain conditions. AMD was up 25% on Monday on the back of that news.

[00:04:42] Rory Dowie: And for us, the market took this as one validation of AMD's technology stack, and secondly, the higher demand over the next, you know, few years from OpenAI. All of this investment is because these companies are striving for what we call artificial general intelligence or AGI that is human-like AI intelligence.

[00:05:00] Rory Dowie: And really that's been driving the huge amounts of investments we've seen from all these companies. And until now, that investment's really been driven by these very, very large companies, which are very, very profitable and have powerful balance sheets. So the Microsofts of this world, Amazon, Google, companies like that.

[00:05:17] Rory Dowie: And again, those guys are expected to spend about $320 billion this year and it's meant to go to over $500 billion in the not too distant future. Just to put OpenAI into context, 'cause obviously they've had a lot of deals, they're expected to invest around $1 trillion in the coming years. For us, we are getting a little bit worried about how OpenAI in may finance, some of these deals, 'cause they're actually quite loss making.

[00:05:39] Rory Dowie: I think they're gonna lose about a hundred billion dollars this year. And you know, their revenues are dwarfed by these capital commitments. So the earnings visibility has got a bit cloudier, but we still do think there is room to run on this kind of AI trade. But as I say, as a team, we'll be looking at OpenAI very, very closely.

[00:05:55] Rory Dowie: 'Cause they kind of seem like they're at the epicenter of a lot of these AI deals.

[00:06:00] Nathan Sweeney: Yeah, and it has been a question that's come up recently in client meetings, you know, so are we in some kind of AI bubble, but Rory, let's focus on the week ahead. What have we got coming up?

[00:06:09] Rory Dowie: Yeah, so this week we've got US inflation data.

[00:06:12] Rory Dowie: We'll be watching that closely and to see how that may affect the expectations of rate cuts. Clearly the fed's in a pretty tricky place still and then come around again already, but it's third quarter earning season in the US. JP Morgan I think are reporting tomorrow. That is Tuesday, and then the other banks to follow.

[00:06:26] Rory Dowie: So lots of stocks to look out for next week.

[00:06:29] Nathan Sweeney: Okay. Thanks Rory. Really insightful as usual, and I'm sure our listeners would agree. Thanks for listening in everybody, and have a great week.