Stocks Slip as AI Wobbles

Mixed Close – The Dow fell 498 points, the S&P 500 slipped 0.8%, and the Nasdaq dropped 1.2% as investors rotated out of high-multiple AI leaders and into defensives.

Narrow Leadership – The S&P 500 is now 3% off its recent all-time high while the Nasdaq has fallen more than 5% from its record, underscoring how concentrated this year’s rally remains in just a handful of names.

AI Tension – Nvidia slid 2.8% as traders questioned whether the company can justify expectations for revenue near $57B this quarter and potentially $64B next quarter amid concerns about unsustainable AI capex.

Sector Rotation – Citi analysts said AMD is now the “most favored” semiconductor stock based on investor flows, supported by targets calling for EPS to reach $20 in the coming years.

Crowded Trade – Investors warned that Nvidia may not rally unless its revenue guide exceeds $65B, reflecting how heavily Wall Street is leaning on numbers that already assume multi-billion-dollar beats.

Credit Warning – Oracle shares have fallen roughly 37% from their September highs after the company prepared to add about $38B in new debt, a move that pushed its 5-year CDS sharply higher and raised questions about the balance-sheet strain behind AI infrastructure spending.

Data Flood Ahead – With the shutdown over, the September nonfarm payrolls report and producer price index will finally be released this week, offering long-delayed clarity on labor and inflation trends.

Blind Spot – The Fed enters its December meeting with limited recent data, making a rate hold more likely as policymakers wait for hard evidence that the economy is cooling in a controlled way.

Liquidity Watch – BCA Research expects the Fed to stop balance-sheet runoff next month and begin roughly $16.4B per month in reserve-management T-bill purchases by March to stabilize emerging money-market tightness.

Break Below $90K – Bitcoin briefly fell to $89,409 before rebounding to around $92,000, now sitting nearly 30% below its late-October peak above $126,000.

Macro Doubts – Market pricing now shows only about a 40% chance of a December Fed rate cut, down from 55% last week, leaving traders reluctant to take risk ahead of fresh inflation and labor numbers.

Leverage Unwind – More than $19B in derivatives liquidations earlier this month continues to weigh on sentiment as ETF flows stagnate and crypto-linked equities slide.

Network Outage – Cloudflare suffered a major outage affecting Coinbase, Kraken, Spotify, ChatGPT, and thousands of sites, highlighting how dependent digital markets have become on a few core internet infrastructure providers.

Home Depot Miss – Home Depot posted Q3 revenue above expectations but missed on adjusted earnings, guiding to roughly 3% total sales growth for FY2025 with only “slightly positive” comparable sales.

Retail Watch – Traders now await earnings from Walmart and Target plus Microsoft’s developer conference, which will offer a clearer view of consumer resilience and enterprise demand for AI-driven data center expansions.

Approval Slide – A new Reuters/Ipsos poll shows President Trump’s approval rating falling to 38%, the lowest since returning to office, with only 26% approving of his handling of the cost of living.

Corporate Tone – Mentions of tariffs in S&P 500 earnings calls dropped from about 90% in Q1 to roughly 45% in Q3, while recession references have nearly disappeared even as layoff announcements surged in October.

Wall of Worry – Barclays expects global equities to rise into 2026 with an SXXP target implying roughly 9% upside, supported by fiscal easing, strong balance sheets, and more than $7.5T still sitting in money-market funds.

AI Balance – Use recent weakness to rebalance between high-growth chipmakers like AMD and steady cash-flow engines such as Microsoft or Broadcom that benefit from AI demand without extreme risk in valuation.

Safety Valve – Trim exposure to unprofitable or stretched tech names and rotate capital toward high-quality companies with durable earnings and clean balance sheets.

Crypto Patience – Build Bitcoin exposure only through slow dollar-cost averaging while avoiding leverage until ETF flows recover and macro conditions stabilize.

Cash Edge – Maintain a meaningful cash or short-term Treasury position so you can buy strong assets on further pullbacks as the Fed navigates data gaps and early liquidity signals.