MARKET RECAP
💔 Markets Plummet as Trump Reignites Trade War with China

😰 The last two Weekly Buzz articles have been a bit ‘doom and gloomy’:

• 2 weeks ago, I wrote about Buffett saying the stock market is ‘playing with fire’

• Last week, we covered the CEO of Goldman Sachs saying the market is ‘due for a drawdown’

🚀 So today I planned to shift gears and cover the more positive story of $AMD’s massive 35% stock jump…

😅 But then Trump tweeted… announcing what looks to be a new trade war with China. So while I’ll still cover AMD’s massive jump (and the possibly worrying rise of ‘circular deals’), let’s first talk about what’s going on with the market and why the S&P 500 just posted its biggest weekly decline since May.

😢 There’s no way to sugarcoat it, the markets had a rough week:

• The S&P 500 fell -2.7%

• The Nasdaq-100 fell -3.1%

• And even Bitcoin had a ‘flash-crash’ falling -7.5%

🤔 So what happened?

👊 Trump Says ‘China Started It’ With Restrictions on Rare Earth Metal Exports

👀 Back in April, when Trump’s ‘Liberation Day’ tariffs were announced, they seemed to come a bit out of nowhere, with Trump pointing to trade deficits as the reason for the tariffs.

⛏️ Well this time, things are a bit different, as the new US-China tariffs are in direct response to restrictions China has placed on the exports of its rare earth metals that are critical for US tech and manufacturing. In Trump’s words:

💬 Trump goes on to say in his Truth Social post that China is trying to “hold the World captive” and that the United States must “financially counter their move”.

❌ After his post, Trump then announced a new 100% tariff on China exports to the US, imposing export controls on “any and all critical software”.

🏆 With China ranking as the #1 supplier of goods to the US, accounting for 16.5% of total imports, these tariffs will no doubt have a significant impact on the already shaky US economy, and as we saw on Friday, the new uncertainty sent the stock market into a bit of a tailspin.

❓ Will Things Get Worse or Better?

A -2.7% drop isn’t all that bad, and a small drawdown is probably a good thing for a market that many were saying was looking overvalued, but is the worst behind us, or are we in for more pain on Monday?

• ⭐️ Well, on one hand, investors have done well this year by buying the tariff dips. If you had bought the S&P 500 on Liberation Day, you’d be up +30% (compared to the +12% YTD return).

• 😰 But back in April, the market fell a massive -15%, and so the -2.7% drop may just be the beginning. And with China saying it will introduce its own countermeasures if Trump carries out his tariff threat, things may get worse before they get better.

⏰ Trump says the tariffs will take effect on Nov 1, but could be sooner depending on further actions taken by China.

👀 Until then, eyes will be turning to earnings with JPMorgan, Johnson & Johnson, and ASML kicking off their reports this week, and then the big AI-driven Mag 7 stocks later in October.

🙋‍♂️ What I’m Doing

Personally, I took the dip as an opportunity to pick up some positions with some of my unused cash, as you can see on my Blossom portfolio:

💡 Note that while I picked up a bit of S&P 500, the majority of my buys were in the Developed Markets and Emerging Markets ETFs to diversify my portfolio (as from my perspective, the S&P is very expensive right now compared to global markets, as I posted about here).

🚨 But as always, don’t just copy what I do, as you and I may have very different risk tolerance, time horizons, or perspectives on the market!

👀 All right, now that we’ve covered the mini-tariff crash, let’s turn our attention to the other big story I wanted to cover this week, AMD’s massive jump on Monday!

✨ But first, a quick word about the last investing event we have on the calendar for 2025!

UPCOMING EVENTS
🏖️ Join Us At MoneyShow Orlando!

😎 For any readers in Orlando, excited to share that we’ll be attending the MoneyShow this Friday & Saturday and hosting a mini Blossom meet-up on Friday at a bar for any folks at the conference!

✨ The conference is free to attend, with lots of awesome speakers joining from across the US, including our very own Tim Johnson - Blossom’s Head of Partnerships giving a talk on the rise of social investing!

😊 See you there!

BIG TECH & AI
🚀 AMD Soars 43% After Announcing Partnership with Nvidia

🚀 While the market overall had a rough week, one company was flying high.

📈 After OpenAI announced it would take a 10% stake in the chipmaker, Advanced Micro Devices ($AMD) had its best 3-day run since 2016, soaring +43% from market close on Friday to Wednesday and ending the week up 30% despite the tariff worries.

✨ AMD, similar to Nvidia, sits at the hardware layer of the AI value chain, designing GPUs and CPUs that power AI training and inference. This deal significantly boosts AMD’s profile in the AI-chip war, with many analysts saying that the deal is likely a move by OpenAI to diversify its chip suppliers (aka not be too dependent on Nvidia).

😰 The Rise In Worrisome ‘Circular Deals’

🚨 But while great for the stock, many say the rise in these so-called ‘circular deals’ is a big warning sign for the markets:

💰 In this deal, OpenAI is committing to buying 6 gigawatts of AMD GPU capacity, which based the current price and power capacity of GPUs, would cost likely over $100B. To help OpenAI pay for this, AMD is giving it equity, with the expectation that its stock will rise on the announcement of the deal (as it did).

🤝 In a similar fashion, a few weeks ago Nvidia annouced it would invest $100B into OpenAI in order for OpenAI to purchase and deploy 10 gigawatts of AI data centres with Nvidia GPUs, which of course increases Nvidia’s revenue, and led to a jump in Nvidia’s stock.

🔄 Similar circular deals have taken place with CoreWeave, Oracle, and other tech players, creating the risk of a ‘mirage of growth’.

According to Oxford Economics:

😬 Others are more blunt, accusing Big Tech of essentially ‘faking revenue’ or calling it an ‘infinite money glitch’.

🫣 To some, these deals are reminiscent of similar deals in the run-up to the 2000 dot-com bubble, when the rise of ‘vendor financing’ led to businesses financing their customers’ purchases, with one article in 2002 saying:

⭐️ To others, including OpenAI CEO Sam Altman, the deals are a form of financial innovation, enabling the massive compute power the AI giants need in their quest for the holy grail of Artificial General Intelligence (AGI), which will lead to a significant boost in revenue and profits (therefore justifying these deals).

🙋‍♂️ My Thoughts

😰 Personally, I find the rise in these circular deals quite concerning, and plan to sell some of my direct Nvidia position (which is now up +46% since I purchased) while maintaining the Nvidia exposure I have through the S&P 500 (Nvidia is now 7.5% of the S&P 500).

💡 You’re welcome to disagree with me on this, and I’m excited to hear your thoughts on my Blossom trade post this week, but these deals change the risk profile for me, and so I’ve decided to take profits and re-invest these into my ETFs!

FROM THE BLOSSOM COMMUNITY
⭐️ Featured Discussions this Week

👇 Click to see the full post!