More expensive groceries, incoming

Good afternoon and a very happy last FRIDAY of October. Investors took USD 500 bn off a single company over AI spending this week and moved into Treasuries. The people who allocate that money spent the week in Abu Dhabi and Kuwait City being pitched Gulf infrastructure, and the war that created the pitch is turning up in grocery bills.

Alphabet shares fell 13% yesterday, taking a record USD 500 bn off its market value in the second-biggest one-day loss in Wall Street history, the Financial Times reported. The company spent USD 9.1 bn more than it took in during 3Q as AI spending climbed to USD 51.3 bn, and search revenue growth slowed to 12% as AI answers ate into ad sales.

More tech tumbles: Amazon fell 6% after missing estimates even as AWS grew 39%, its fastest since 2021, and Intel dropped 22% on a weak outlook it blamed on a PC slump caused by memory chip shortages. Microsoft was the exception, still generating more than it spends, and is raising USD 25 bn in bonds to help fund USD 170 bn of capital spending this year, according to CNBC. China’s AI names are sliding on their own account, with the CSI 300 down about 20% from its June peak and the move spreading to Hong Kong on weak domestic demand, the property slump and shrinking state spending. Nasdaq-100 futures fell 1.7% and investors moved into Treasuries.

Marc Rowan, Larry Fink, Stephen Schwarzman and Scott Nuttall spent the week in the Gulf regardless. With FII postponed, the four were in Abu Dhabi and Kuwait, with Kuwait’s crown prince sitting down with the BlackRock and KKR chiefs, Semafor reports. Schwarzman expects a “very substantial construction boom” as countries move vulnerable infrastructure underground, and Blackstone is planning a fourfold increase in its Gulf assets. Apollo has taken a USD 1 bn stake in Mubadala Capital, and Rowan puts the regional bill at USD 1 tn for hardening infrastructure and building alternative transport routes.

One of these routes is up and running again after a brief spat-fueled closure. Syria reopened the Nassib crossing with Jordan a day after closing it, with the two countries’ foreign ministers agreeing to form a joint security committee to examine the strikes and their consequences, according to The National. Jordan’s Ayman Safadi expressed “deep regret and sorrow” over civilian deaths in Amman’s retaliatory strikes on what it said were ISIS targets, following a terror attack on a church in Jordan last week.

The energy and freight costs that come with all of this are already on grocery shelves. Dubai food and drink prices were up 8.05% y-o-y in September, and Coca-Cola, Procter & Gamble, Nestlé and Reckitt are all lining up further increases for 2027, warning that the war will keep energy, raw material and freight bills elevated, Reuters reports. “We will probably have to price more,” Reckitt CEO Kris Licht said. Saudi consumer inflation is running at 1.9% with wholesale prices up 4.2%, a gap that usually reaches shelves later.

One kind of spending we can still count on? Using AI for all the things. In Saudi Arabia, the latest is using AI for football scouting. Humain Sport is using AiScout, which Premier League and Major League Soccer clubs also run, to find players conventional networks miss, measuring sprint speed, jump height and symmetry, including differences in movement between the left and right sides of the body, AGBI reports. Humain sponsors Al Nassr, where ai.io's Felton-Thomas said more AI projects are on the way. –Salma