by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens with a look at the White House’s efforts to resolve global conflicts. We then turn to AI, examining why SpaceX’s earnings have lifted sentiment around the AI trade. Next, we briefly discuss Germany’s debate over nationalizing landlord assets and explain why US-Mexico trade talks broke down. We conclude, as always, with a review of the latest domestic and international economic data.

Easing Tensions: There are growing signs that the White House will push to end active conflicts in the coming weeks. Unconfirmed reports on Thursday hinted at an impending US-Iran truce, though those claims were quickly dismissed. Meanwhile, Ukraine appears to have softened its stance on US-led peace negotiations following accusations that SpaceX restricted its access to Starlink satellite internet. These diplomatic pressures come as the White House seeks to stabilize global energy markets ahead of the midterm elections.

• Washington remains skeptical about whether Iran is willing to hold talks before the midterm elections. While Iranian representatives maintain that negotiations will not resume unless the US lifts sanctions and ends its threats, White House officials claim Tehran is intentionally stalling to see whether the November outcome provides greater leverage. Also, a prominent Iranian official stated that Iran is still unwilling to relinquish any of its enriched uranium reserves.
• Meanwhile, Ukrainian President Volodymyr Zelenskyy met with European and US officials to discuss a potential framework to end the war in Ukraine. Following negotiations, which Finnish representatives described as “genuine progress” toward peace, Zelenskyy confirmed that full access to Starlink services was being restored. These diplomatic developments coincide with expectations that President Trump may meet with his Russian and Chinese counterparts on the sidelines of next month’s APEC summit.
• The ongoing conflicts involving Ukraine and Iran continue to disrupt two of the world’s most critical oil chokepoints. Before the disruptions, the Strait of Hormuz and the Black Sea export routes together carried roughly 23 million barrels per day. Constrained flows through these waterways have been a key driver of the inflation shocks of 2022 and, more recently, 2026. Resolving these conflicts is, therefore, central to easing price pressures.
• There is a strong possibility that the conflicts in both Ukraine and Iran could be resolved by 2027. If so, this would likely provide a powerful tailwind for markets by not only lowering inflation but also reducing the need for tighter monetary policy. However, the path forward continues to be uncertain, given questions about how many concessions the US is willing to make to secure a deal. While we remain cautiously optimistic, we advise investors against rushing to take on excessive risk.

AI Sustained: Recent earnings have helped sustain optimism that the AI trade is still alive. On Tuesday, SpaceX reported stronger-than-expected earnings, helped by a sharp increase in demand for its AI business. This revenue surge has eased fears that the infrastructure buildout is happening too fast, worries that have been heightened by concerns over companies’ ability to service debt amid rising input and borrowing costs. Earnings growth remains a barometer of AI momentum as the technology continues to account for a larger share of the economy.

• SpaceX, which went public in June, provided further evidence that AI companies can maintain strong business growth. In the third quarter, the company reported revenue of $14.6 billion, a 161% increase year-over-year that easily topped market expectations. While much of this growth was driven by recurring revenue from its satellite internet service, Starlink, SpaceX also experienced a major boost in demand for its Super Intelligence business.
• The earnings arrive as AI debt has become a gauge of the buildout’s sustainability. Alongside Oracle and CoreWeave, SpaceX has come under heavy fire over its leverage. Earlier this month, its five-year credit default swap spread rose to a record 194 basis points as it was reported to be in talks to raise $40 billion to buy Nvidia chips. As the AI infrastructure buildout grows increasingly expensive, these companies’ debt burdens are still a key focus for investors assessing whether the AI boom is entering a bubble.
• The AI buildout remains one of the primary drivers of US economic growth as the nation stakes its future on the technology. According to the Brookings Institution, if tech companies follow through on their projected $10.3 trillion in AI spending through 2032, the sector could contribute an average of 3.63% of GDP each year. By comparison, the infrastructure expansion is expected to account for a larger share of economic growth than historical milestones such as canals, railroads, electrification, and the internet.
• SpaceX’s earnings are likely to boost market sentiment regarding the sustainability of the AI boom, especially as Anthropic and OpenAI prepare to go public. The primary concern for investors continues to be whether demand for these products can keep pace with rising costs, particularly as demand pressures drive up inflation and heavy debt issuance lifts yields. So far, however, there are no signs of an imminent bust.

Nationalizing Property: German Chancellor Friedrich Merz has warned against efforts to nationalize assets owned by landlords. During a speech, he stated that protecting property rights and maintaining trust in a functioning market form the basis of a market economy. His remarks appear to address a push by Berlin politicians, including members of the Social Democratic Party (SPD), Greens, and Die Linke, to resolve the city’s housing crisis while fending off political challenges from the far right and far left.

Mexico Trade Talks: Trade talks between the US and Mexico broke down following pushback over steel tariffs. The negotiations appeared to be approaching an agreement, with Mexico working out an arrangement to lower US-imposed tariffs on metal derivatives. However, those talks stalled after White House officials raised objections regarding proposed concessions. While a deal is still likely, it is now not expected until after the midterm elections.

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