Trump's Kevin Pick Calms Markets, But Software Bleeds

$50 billion. That's how much Amazon might invest in OpenAI over the coming weeks. But markets were more focused on another Kevin making headlines—Trump's pick for the next Fed Chair.

The Safe Choice Wall Street Wanted

President Donald Trump ended speculation this morning by nominating former Fed Governor Kevin Warsh as the central bank's next chairman. "I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best," Trump declared on social media.

Markets barely flinched—exactly what Wall Street hoped for. Warsh brings Fed pedigree and a reputation for political independence, unlike some other names floated. The other finalists included National Economic Council Director Kevin Hassett, current Fed Governor Christopher Waller, and BlackRock's Rick Rieder.

But confirmation won't be smooth sailing. Republican Senator Thom Tillis has pledged to block any Fed nominees until the criminal investigation into current Chair Jerome Powell concludes—a stance that could complicate Warsh's path to the job.

Software's Spectacular Fall

While the Fed news provided stability, tech stocks told a different story. The iShares Expanded Tech-Software Sector ETF (IVG) recorded its worst day since April, officially entering bear market territory with a 22% drop from recent highs.

Microsoft led the carnage, tumbling 10% in its worst session since 2020 and erasing more than $350 billion in market cap. Despite beating earnings expectations, the company's softening cloud growth and weak operating margin outlook spooked investors.

ServiceNow also shed 10%, even after beating analyst expectations. Wall Street's growing anxiety about AI disrupting the enterprise software sector overshadowed the positive results.

The sector is now on track for its biggest monthly loss since 2008—a stunning reversal for an industry that was once Wall Street's darling. The decline dragged down the tech-heavy Nasdaq, though major indexes remain positive for the month.

Amazon's AI Double-Down

In a move that could reshape the AI landscape, Amazon is reportedly in talks to invest up to $50 billion in OpenAI. Sources tell CNBC that Sam Altman and Andy Jassy are in direct discussions, though the talks remain fluid and the final amount could change.

What makes this particularly intriguing? Amazon has already poured billions into Anthropic—OpenAI's main competitor—since 2023. The potential deal suggests Amazon is hedging its bets in the AI arms race, unwilling to put all its chips on one horse.

The investment would dwarf most tech deals and signal just how seriously Amazon views the AI opportunity. An Amazon representative declined to comment on the discussions.

Government Shutdown Still Looms

Despite Trump's endorsement of a Senate funding deal yesterday, a partial government shutdown starting Saturday morning remains likely. The revised package would fund most departments but notably excludes Homeland Security—removed after federal immigration agents killed two U.S. citizens in Minnesota this month.

Senate Democratic Leader Chuck Schumer said DHS would instead receive two weeks of stopgap funding. Objections from lawmakers on both sides delayed a Senate vote last night, keeping the shutdown threat alive.

Apple's Staggering Demand

In brighter tech news, Apple crushed Wall Street expectations across the board. CEO Tim Cook called iPhone demand "staggering," with overall iPhone revenue climbing 23% annually. The company said sales could've been even better with more chip access.

Apple also confirmed acquiring Israeli AI startup Q.ai, though it didn't disclose the purchase price. The startup appears to be working on audio-related AI products.