The Street: Driven by a rebound in large-cap tech stocks, all three major U.S. indices rose last Friday (9th), with the Dow up 0.8%, and both the S&P 500 and Nasdaq up 0.6%. For the entire week, all three indices recorded gains. However, the Philadelphia Semiconductor Index recorded declines both on last Friday alone and for the full week, falling 0.4% and 4.3% respectively.
*U.S. Expected to Hike Rates Again Before Year-End*
The minutes from the U.S. Federal Reserve's September meeting revealed that all 19 committee members unanimously supported a 25-basis-point rate hike that month. Most officials believed further tightening of policy remained possible before year-end to gradually bring inflation back toward the 2% target. However, recently officials including Fed Governor Waller have indicated there is no need to act hastily. Coupled with market belief that inflation is gradually coming under control, maintaining rates unchanged at the end of October remains the mainstream expectation.
The energy market has also seen significant developments. Russia has indicated readiness to increase exports of oil and diesel, and the U.S. has provided temporary facilitation arrangements for such trade. If more Russian energy re-enters the international market, it will help improve supply and ease price pressures. This would not only help reduce inflation risks but also alleviate pressure on the Fed to further tighten monetary policy.
*Focus on Inflation Data This Week*
Looking ahead, September's CPI and PPI data will be market focal points this week. The market expects overall inflation to still be influenced by energy factors, but core price pressures to remain moderate. Meanwhile, retail sales, industrial production, initial jobless claims, and the Fed's Beige Book are also worth watching. If consumer growth slows while core inflation continues to cool, market confidence in interest rates having peaked could strengthen further.
Before moving to individual stock analysis this week, two technology sector developments are worth noting. As mentioned above, AI-related stocks performed weakly last week, partly related to OpenAI. OpenAI recently disclosed an annualized revenue of approximately $50 billion, lower than the previously circulated figure of $68 billion. The discrepancy mainly involves whether revenue from partner collaborations is included in the calculation, but the incident reflects extremely high market expectations for AI commercialization. Over the past two years, capital has been willing to assign high valuations to AI visions; now investors are beginning to place greater emphasis on whether revenue growth can ultimately translate into profits and cash flow. The AI industry is gradually shifting from concept-driven to profit-driven.
Another noteworthy development comes from Apple (US.AAPL). Supply chain reports indicate that sales of its new high-end iPhone models may fall short of initial market expectations, with some component orders being adjusted. This suggests that even as the AI boom continues to lift the tech sector, global consumer electronics demand has not yet fully recovered. The technology sector is becoming increasingly fragmented—AI infrastructure-related firms remain popular with capital, but the recovery in end-consumer demand remains slow.
*Optical Communications Key to AI Infrastructure*
Against this backdrop, Lumentum Holdings (US.LITE) warrants investor attention. The market has long focused on AI chip leaders such as NVIDIA (US.NVDA), but the key to AI development now extends beyond computing power to include the efficiency of massive data transmission. As large language models continue to grow in scale, data centers need to handle ever-larger volumes of data exchange, elevating the strategic importance of optical communications in AI infrastructure.
Lumentum is a global leader in optical and photonic technologies, with products including lasers, optical modules, and optical subsystems, primarily used in AI data centers, cloud computing, and next-generation communication networks. This year, NVIDIA has included Lumentum as one of its core optical communications supply chain partners. Beyond adopting its laser technology solutions in next-generation network switches, NVIDIA has also secured future capacity through investments and long-term procurement agreements, highlighting high-speed optical interconnects as a crucial component of AI infrastructure.
The company will release its earnings in early November. I will provide timely updates on its investment outlook for fellow investors. At this stage, volatility in AI-related stocks remains high, and the market is reassessing valuation levels across the AI supply chain. Therefore, it is advisable to remain on the sidelines for now, and consider positioning only after the November earnings report and management's guidance on AI demand prospects provide greater clarity.
Watch the video now: https://media.etnet.com.hk/video/content/lifestyle/features/interview/2026/10/12102026_kennywan_a001.mp4
Kenny Wan, Council Member, Hong Kong Society of Financial Analysts
*The author is not a licensed person of the Securities and Futures Commission and holds no positions in the aforementioned recommended stocks.
*Articles published in ETNET, signed or unsigned, represent the authors' personal opinions and do not reflect the position of ETNET. ETNET's role is to provide a free speech platform.
*U.S. Expected to Hike Rates Again Before Year-End*
The minutes from the U.S. Federal Reserve's September meeting revealed that all 19 committee members unanimously supported a 25-basis-point rate hike that month. Most officials believed further tightening of policy remained possible before year-end to gradually bring inflation back toward the 2% target. However, recently officials including Fed Governor Waller have indicated there is no need to act hastily. Coupled with market belief that inflation is gradually coming under control, maintaining rates unchanged at the end of October remains the mainstream expectation.
The energy market has also seen significant developments. Russia has indicated readiness to increase exports of oil and diesel, and the U.S. has provided temporary facilitation arrangements for such trade. If more Russian energy re-enters the international market, it will help improve supply and ease price pressures. This would not only help reduce inflation risks but also alleviate pressure on the Fed to further tighten monetary policy.
*Focus on Inflation Data This Week*
Looking ahead, September's CPI and PPI data will be market focal points this week. The market expects overall inflation to still be influenced by energy factors, but core price pressures to remain moderate. Meanwhile, retail sales, industrial production, initial jobless claims, and the Fed's Beige Book are also worth watching. If consumer growth slows while core inflation continues to cool, market confidence in interest rates having peaked could strengthen further.
Before moving to individual stock analysis this week, two technology sector developments are worth noting. As mentioned above, AI-related stocks performed weakly last week, partly related to OpenAI. OpenAI recently disclosed an annualized revenue of approximately $50 billion, lower than the previously circulated figure of $68 billion. The discrepancy mainly involves whether revenue from partner collaborations is included in the calculation, but the incident reflects extremely high market expectations for AI commercialization. Over the past two years, capital has been willing to assign high valuations to AI visions; now investors are beginning to place greater emphasis on whether revenue growth can ultimately translate into profits and cash flow. The AI industry is gradually shifting from concept-driven to profit-driven.
Another noteworthy development comes from Apple (US.AAPL). Supply chain reports indicate that sales of its new high-end iPhone models may fall short of initial market expectations, with some component orders being adjusted. This suggests that even as the AI boom continues to lift the tech sector, global consumer electronics demand has not yet fully recovered. The technology sector is becoming increasingly fragmented—AI infrastructure-related firms remain popular with capital, but the recovery in end-consumer demand remains slow.
*Optical Communications Key to AI Infrastructure*
Against this backdrop, Lumentum Holdings (US.LITE) warrants investor attention. The market has long focused on AI chip leaders such as NVIDIA (US.NVDA), but the key to AI development now extends beyond computing power to include the efficiency of massive data transmission. As large language models continue to grow in scale, data centers need to handle ever-larger volumes of data exchange, elevating the strategic importance of optical communications in AI infrastructure.
Lumentum is a global leader in optical and photonic technologies, with products including lasers, optical modules, and optical subsystems, primarily used in AI data centers, cloud computing, and next-generation communication networks. This year, NVIDIA has included Lumentum as one of its core optical communications supply chain partners. Beyond adopting its laser technology solutions in next-generation network switches, NVIDIA has also secured future capacity through investments and long-term procurement agreements, highlighting high-speed optical interconnects as a crucial component of AI infrastructure.
The company will release its earnings in early November. I will provide timely updates on its investment outlook for fellow investors. At this stage, volatility in AI-related stocks remains high, and the market is reassessing valuation levels across the AI supply chain. Therefore, it is advisable to remain on the sidelines for now, and consider positioning only after the November earnings report and management's guidance on AI demand prospects provide greater clarity.
Watch the video now: https://media.etnet.com.hk/video/content/lifestyle/features/interview/2026/10/12102026_kennywan_a001.mp4
Kenny Wan, Council Member, Hong Kong Society of Financial Analysts
*The author is not a licensed person of the Securities and Futures Commission and holds no positions in the aforementioned recommended stocks.
*Articles published in ETNET, signed or unsigned, represent the authors' personal opinions and do not reflect the position of ETNET. ETNET's role is to provide a free speech platform.
