Markets
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Luke Kawa

One chart that shows why the Federal Reserve went for a big cut

The Federal Reserve is worried about the labor market.

The median monetary policymaker thinks the unemployment rate (currently 4.2%) will be at 4.4% at the end of this year and the next, a worse outcome than they foresaw when releasing their last set of projections in June.

But that’s not all. Officials think that, if they’re wrong, it’s more likely to be because the job market does worse than they anticipate and the unemployment rate is even higher.

Twelve monetary policymakers think the risk is that the unemployment rate goes up even more than they expect. That’s the same number that felt the same way back in June 2019, right before the central bank started a small rate-cutting cycle at its next meeting.

It’s a pretty simple formula: realized inflation has come down, the unemployment rate has gone up, and based on history, Federal Reserve officials are aware that when it rises this much, it tends to keep rising. The central bank does not want high borrowing costs to be a problem for the economy because inflation is no longer a big problem for the economy.

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Luke Kawa

AMD posts top- and bottom-line beat in Q3 with Q4 sales guidance ahead of estimates

Advanced Micro Devices reported third-quarter results that exceeded analysts’ expectations on the top and bottom lines, with guidance to match.

  • Adjusted diluted earnings per share: $1.20 (compared to an analyst consensus estimate of $1.17)

  • Revenue: $9.25 billion (estimate: $8.74 billion, guidance: $8.4 billion to $9 billion)

  • Data center revenue: $4.34 billion (estimate: $4.14 billion)

  • Adjusted gross margin: 54% (estimate: 54%, guidance: 54%)

Its Q4 guidance for sales of $9.3 billion to $9.9 billion was strong relative to the anticipated $9.2 billion, while its adjusted gross margin outlook of 54.5% is bang in line with estimates.

Even so, shares are off about 2% in after-hours trading as of 4:24 p.m. ET.

“AMD’s strong 3Q sales beat and 4Q outlook were likely driven by stronger PC and server CPU demand — similar to Intel’s results — along with continued share gains,” Bloomberg Intelligence analysts Kunjan Sobhani and Oscar Hernandez Tejada wrote. “The GPU ramp-up remains ahead of expectations, aided by a gaming rebound.”

AMD has had a high-profile Q4 so far, striking a megadeal with OpenAI that its CFO said “is expected to deliver tens of billions of dollars in revenue.” That announcement prompted more than 20 price target hikes from Wall Street analysts in a 24-hour span.

The company followed that up with a pact with Oracle, which said it would deploy 50,000 of AMD’s new flagship chips in data centers starting in the second half of next year. On the upcoming conference call, the Street will be looking for as much color as possible on the sales outlook for those MI450 chips.

Ahead of this release, Morgan Stanley analyst Joseph Moore wrote:

“The focus should remain on MI450. AMD’s rack scale solution shipping next year is the key, and we are excited to see what the company can do. It’s still early to make market share assessments, and while the Open AI agreement is clearly an accelerant, the reliance on cloud providers to ramp those 6 gigawatts still creates some uncertainty. Ultimately, to drive share gains, the company will need to provide better ROI than NVIDIA can offer, and customers still raise questions about that given lower rack density and the need to resolve ecosystem issues.”

The chip designer was the third-best-performing member of the VanEck Semiconductor ETF in 2025 heading into this report, with shares having more than doubled year to date.

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