US inflation came in hot again in October, and traders are now bracing for the Federal Reserve to step in with more interest rate hikes. At the same time, a surge in demand from AI data centers gave Siemens Energy a powerful profit boost, sending its shares sharply higher.
What the latest inflation data shows
The government's latest reading on consumer prices, released this week, showed that prices rose 0.4% in October compared with the previous month. That was faster than many economists had expected. More concerning, core inflation—which strips out volatile food and energy prices—also topped forecasts, coming in at 0.3% for the month.
Because of the government shutdown in October 2025, year-on-year figures weren't available. But the monthly numbers were enough to worry investors who had hoped that price pressures were finally cooling.
US inflation has now been running above the Fed's 2% target for five straight years. That's a long stretch that has repeatedly dashed the central bank's hopes that prices would come down on their own without aggressive intervention.
What it means for interest rates
Traders have responded by fully pricing in a rate hike at the Fed's December meeting, and another one by March. In fact, there's now a 75% chance that the second hike could come as soon as January.
The Fed already raised rates in September—its first increase since 2023. But this time, higher rates may not be the right tool for the job. The war in Iran has choked off oil and gas supplies, pushing energy prices up and spilling into other goods and services. Raising interest rates doesn't create more energy supply. What it does do is squeeze borrowing and spending, which could slow the broader economy.
There is some relief on the energy front: Brent crude, the global oil benchmark, has fallen 20% recently. But it's still up 50% so far this year, and there's no guarantee that lower prices will stick or that they'll undo price increases elsewhere.
For a look at how inflation is affecting other currencies, see how Indonesia's rupiah hit a record low as US inflation and politics weighed on emerging markets.
What it means for your investments
Despite higher prices, consumers have kept spending. That has helped prop up both the economy and corporate earnings. And that profit growth has made US stocks look less expensive. The S&P 500 is now trading at around 18 times its companies' earnings, down from 22 at the start of the year—and near its lowest level since November 2023.
Stocks still aren't cheap by historical standards, but they're cheap enough to keep investors interested. As long as earnings stay strong, the market could keep climbing. But if the Fed's rate hikes start to bite and slow consumer spending, that could change quickly.
For more on the Fed's path, check out our analysis of traders' bets on Fed rate hikes.
Siemens Energy rides the AI wave
On the corporate front, Siemens Energy delivered a bright spot. The company, which makes the heavy equipment that generates and transports electricity, said its order backlog hit a record high last quarter, powered by demand from AI data centers.
Utility companies need Siemens Energy's turbines, transformers, and other gear to keep up with the massive electricity appetite of data centers that train and run AI models. That demand is translating into profit: the company said it expects its profit margin to expand from 12.4% this year to as high as 22% by 2030, with revenue growing by up to 14% a year on average over the same period.
Siemens Energy is also sharing the wealth with shareholders. It announced a dividend that's more than triple last year's, plus a share buyback program of up to $10 billion. Investors cheered the news, sending the stock up 11%.
For more on how AI is reshaping the energy sector, see our piece on Microsoft and Chevron teaming up to power data centers.
Too much of a good thing?
But not every company has navigated the AI boom smoothly. When the AI boom first took off, SoftBank—the Japanese investment giant—rushed to reserve enough US gas turbines to power six Hoover Dams. It turned out that was too much. After realizing it had more turbines than it needed, SoftBank had to cancel its leftover reservations, taking a $3.7 billion hit.
That doesn't mean data center demand isn't real—just that the pace of expansion wasn't quite as fast as some had expected. It's a reminder that even in a booming sector, companies can overextend themselves.
A good day for data center stocks
Meanwhile, CoreWeave, a so-called neocloud that rents out computing power to companies training and running AI models, also had a good day. Its stock had been under pressure as investors grew cautious about anything AI-related. But on Tuesday, CoreWeave reported that it beat sales and earnings expectations last quarter, and it offered a strong sign of continued demand with $133 billion in unfulfilled customer contracts.
Even better, CoreWeave reassured investors that it has several funding options for its data center builds. The stock jumped more than 24% on Wednesday.
For more on the broader AI investment landscape, check out our coverage of retail traders' interest in Anthropic's IPO.
The bottom line
For everyday investors, the key takeaway is that inflation remains stubborn, and the Fed is likely to keep raising rates. That could mean higher borrowing costs for consumers and businesses, and it could put pressure on stock valuations. But strong corporate earnings—especially from companies tied to AI and data centers—are helping to offset some of that pressure.
As always, it's important to keep a long-term perspective and not make hasty decisions based on short-term market moves.
