Devon Funds Morning Note - 7 October 2025

Wednesday 8th October 2025

AI Deals Drive Records, Politics Fuel Volatility

Global

The S&P 500 edged up 0.38% to close at 6,741.26, marking another record high, buoyed by ongoing optimism around artificial intelligence and robust deal activity. The Nasdaq Composite rose 0.71%, finishing at 22,941.67, as technology shares rebounded and AMD surged on news of a major partnership with OpenAI. In contrast, the Dow Jones Industrial Average slipped 0.14% to close at 46,494.67, as losses in financials and cyclicals offset gains elsewhere.

The gains in the S&P 500 and Nasdaq came despite the ongoing US government shutdown and the continued absence of official economic data, with investors remaining focused on big tech momentum and upcoming signals from the Federal Reserve. Treasury yields held steady, and overall trading volume stayed close to its historical average.

Advanced Micro Devices (AMD) has entered a landmark, multi-billion-dollar partnership with OpenAI to power the next generation of AI data centres using AMD’s high-performance Instinct GPUs. Under the definitive agreement, OpenAI will deploy up to 6 gigawatts of AMD GPUs across multiple years, beginning with a 1-gigawatt rollout of the new MI450 series chips in the second half of 2026.

As part of the deal, AMD issued OpenAI a warrant to acquire up to 160 million shares, potentially a 10% equity stake, tied to deployment milestones and stock price targets, aligning both companies’ long-term interests. The agreement is expected to generate tens of billions of dollars in revenue for AMD over the life of the partnership, while enabling OpenAI to rapidly scale up compute for cutting-edge generative AI models and applications. AMD closed up +23.71% to US$203.71.

The deal has intensified concerns about a brewing bubble in the artificial intelligence sector, with many analysts warning of “circular” financing where a small group of dominant players buy, sell, and invest largely amongst themselves. These types of mega-deals, combined with early-stage startups raising capital at sky-high valuations, are drawing strong parallels to the late-1990s dot-com bubble, where enthusiasm and funding outpaced near-term profits and product realities.

In fixed income, US Treasury yields were 2–4 basis points higher across the curve, with the 10-year yield holding steady near 4.16%. Commodity prices displayed a mixed pattern. Gold advanced further, while oil bounced back on supply concerns related to OPEC+ and recent geopolitical tensions.

Political turmoil erupted overnight after French Prime Minister Lecornu’s abrupt resignation, following less than a month in office and just after President Macron unveiled a new cabinet. This surprise move comes amid deepening parliamentary deadlock and rising public scepticism, exposing the fragility of the current government as it struggles to unify support for the crucial 2026 budget.

This new round of political instability has weighed on French markets. The CAC-40 index dropped 1.36%, underperforming European peers, reflecting investor anxiety about the government’s ability to control spending and steer through reform.

On the other side of the coin, Asian markets opened with intense focus on Japan following the unexpected selection of Sanae Takaichi as the new Liberal Democratic Party (LDP) leader, which positions her to become the nation’s first female prime minister pending a parliamentary vote later this month. Her leadership is perceived as supportive for equities but bearish for the yen, with markets expecting her administration to maintain loose monetary policy and possibly expand fiscal measures to spur growth.

The Nikkei 225 surged 4.8% to a new record high as investors anticipated renewed pro-growth measures and easier financial conditions. Japanese government bonds (JGBs) saw a classic “steepening” move: the 2-year yield fell by 4 basis points as expectations of tighter policy receded, while the 30-year yield jumped 14bps on the prospect of larger government borrowing needs to fund fiscal expansion.

New Zealand

The Kiwi share market started the week on a softer note, with the NZX 50 slipping 0.18% to close at 13,489.24. Losses were led by Sky Network TV (-0.91%), Tourism Holdings (-1.45%), and Auckland International Airport (-0.25%). Market activity was subdued as investors grew more cautious ahead of the Reserve Bank of New Zealand’s upcoming policy decision on Wednesday.

Auckland International Airport recently responded to the Commerce Commission’s targeted review, which rejected Air New Zealand’s request for a formal inquiry into airport regulation. The Commission examined whether current rules were ensuring major airport investment decisions truly benefitted consumers. It found that while there is scope for improving transparency and oversight, especially regarding how airports make large capital expenditure decisions, a full inquiry would be costly, complex, and likely to result in overly broad regulation across all major airports.

As a result, the Commission declined to launch an inquiry but committed to revisiting and potentially tightening information disclosure requirements next year. This means airports, including Auckland, Wellington, and Christchurch, will be required to provide earlier and more detailed transparency around major upcoming investments, allowing both regulators and airlines to more closely scrutinise plans and costs before they are locked in. Auckland Airport’s management welcomed the decision.

IAG New Zealand has been ordered by the High Court to pay a record penalty of $19.5 million after admitting to multiple breaches of the Financial Markets Conduct Act related to discounts and benefits offered to approximately 269,000 customers. The breaches involved failing to correctly price premiums and apply multi-policy discounts across insurance products sold through its business divisions and distribution partners, including the major brands AMI, NZI, and State.

In economic news, the ANZ World Commodity Price Index fell 1.1% in September 2025, marking a third straight monthly decline and mainly driven by lower dairy prices, which are a key export for New Zealand. Global demand weakness led to a renewed drop in whole milk powder and other dairy commodities, while most other export sectors saw either stable or minor price changes. The recent declines have put pressure on New Zealand’s export earnings, though some losses were cushioned by a weaker NZ dollar, which partially offset the fall in world prices for local exporters.

Australia

The Australian share market retreated slightly, with the S&P/ASX 200 index slipping 0.07% to close at 8,981.40 Financial stocks weighed on the market, led by declines in ANZ Group Holdings (-0.53%) and Commonwealth Bank of Australia (-0.25%), while Pro Medicus (-3.11%), WiseTech Global (-2.17%), and Rio Tinto (-1.18%) also finished lower.

In mergers and acquisitions news, Partners Group is reviving the sale process for Guardian Early Learning, one of Australia’s largest private childcare operators, after last year’s efforts were delayed by regulatory reviews and market volatility. Acquired from Navis Capital for $440 million in 2016, Guardian has since grown substantially operating over 160 centres nationwide, serving major cities and caring for more than 150,000 children annually. The business is understood to generate $80–100 million in annual EBITDA, and sources suggest Partners Group is seeking a valuation between $1 billion and $1.1 billion.

Recent developments, including bolt-on acquisitions and a two-year extension on roughly $500 million in borrowings, have positioned Guardian to present a stronger growth story to potential buyers. Interest is largely coming from financial sponsors rather than trade players, with Pacific Equity Partners already making a non-binding offer.

Primavera Capital is reportedly exploring a sale of Vitaco, its leading Australia and New Zealand-based vitamin and dietary supplement manufacturer, which could fetch between $400 million and $500 million according to market sources. Vitaco owns a portfolio of well-known brands including Musashi (sports nutrition), Healtheries (family health products), Nutra-Life (supplements), and Athena, catering to a wide range of consumers focused on health, fitness, and wellness.

Vitaco’s strong growth has been underpinned by rising health consciousness and the region’s robust dietary supplements market, which is projected to exceed $6.5 billion by 2030.

Later today we will see the release of the Westpac Consumer Confidence Index that is likely to remain in ‘cautiously pessimistic’ territory, with consensus expectations for a flat or slightly negative result as households remain concerned about the economic outlook, interest rate direction, and unemployment, while for the ANZ-Indeed Job Ads release, economists expect the index to be steady or edge lower after last month’s small 0.1% uptick, reflecting a resilient but cooling jobs market.

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