A Chinese Chipmaker Just Spooked the AI Trade 💥

Welcome back to the Day Trading newsletter 📈

Chip stocks tumbled again Tuesday as a Chinese memory maker rattled the AI trade, while the first big-bank earnings delivered a split decision.

Let’s get into it 👇️ 

🔼 Goldman Sachs posted a blowout third quarter, earning $17.01 a share versus roughly $13 expected. Revenue rose 23% to $18.68 billion, led by a 72% jump in equities trading as volatile markets, including swings tied to the Middle East conflict, kept clients busy. Investment banking fees rose 21% to $3.22 billion.

🏦 JPMorgan missed third-quarter estimates and sharply cut its share buybacks. Net income rose 6% to $15.3 billion, but earnings of $5.57 a share trailed forecasts of roughly $5.90. Dimon said the bank is putting investment ahead of stock repurchases, even with about $30 billion in excess capital. Shares were up modestly.

💰️ Citigroup beat estimates, earning $2.85 a share on revenue of $23.8 billion, up 8%. Profit jumped about 40% to roughly $5.2 billion, helped by services and wealth units. But trading and investment banking revenue fell from the prior quarter, and its CFO said Wall Street's deal frenzy is cooling after a record first half.

📉 Wells Fargo shares fell about 3% in early trading even though profit beat forecasts. The bank earned $1.87 a share, versus $1.85 expected, but revenue of $21.87 billion missed the $22.31 billion forecast. CEO Charlie Scharf said customers are doing well despite uncertainty, and the stock is down more than 10% this year.

🏥 UnitedHealth raised its 2026 profit forecast after beating third-quarter estimates. Adjusted earnings were $4.69 a share versus about $4.14 expected, and the insurer now sees at least $20.50 for the year, up from at least $19.50 to $20. Its CFO cautioned that medical costs remain elevated versus historical norms.

✈️ An attack on Riyadh's main airport, blamed on Yemen's Iran-backed Houthis, killed at least 12 people and wounded more than 300 on Saturday. The strike on King Khalid International came after two earlier attacks that week. A Saudi-led coalition vowed to respond, and President Trump said the U.S. may join strikes on the Houthis, raising fears for Gulf oil infrastructure.

🤝 President Trump announced Sunday that Russia and Ukraine agreed to an immediate "energy ceasefire." The Kremlin has not confirmed backing it, and Ukrainian President Volodymyr Zelensky said Russia already violated the truce with strikes, including on a power plant in Kharkiv.

🛢️ Oil climbed Monday as Middle East attacks outweighed the ceasefire headlines. Brent crude traded above $105 a barrel and U.S. crude was in the low $90s, with tanker attacks and the standoff over the Strait of Hormuz keeping supply fears alive. Higher crude feeds directly into gasoline and diesel prices.

China's ChangXin Memory Technologies, or CXMT, announced progress on a denser memory chip design and said it plans a new server memory product before the end of 2026.

The design, known as 4F², shrinks each memory cell's footprint by roughly a third versus the layout most chips use today, so more data fits on the same piece of silicon.

Micron fell about 4% Monday and more than 5% in Tuesday morning trading. In South Korea, Samsung Electronics dropped 7.4% and SK hynix 10.1% Tuesday, and the Kospi stock index fell roughly 5%.

Memory chips are the data storage that feed AI processors, and demand from AI data centers has kept supply tight and prices high, which is why memory makers have been among the market's biggest winners this year.

CXMT is China's largest maker of this type of chip, and a rival that can eventually produce denser, cheaper server memory threatens the pricing power those profits rest on. Samsung, for comparison, is targeting similar technology for mass production around 2028.

There are real caveats: CXMT has not disclosed specifications or production yields, and one Morningstar analyst expects a meaningful gap between unveiling a product and making money on it.

But with stocks priced for perfection, traders did not wait for proof.

What to watch:

• The first test is whether CXMT actually ships a server product by year-end, and at what quality and price.

• Also watch for any commentary on memory pricing from Micron, Samsung and SK hynix, and for TSMC's full third-quarter results on October 15, a read on whether AI chip demand is holding up.

  • If memory prices start slipping, the selloff could spread further through the AI trade.

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⚠️ Disclaimer: Not financial advice. Do your research before making any trades.