4 Recent Developments Show the Stock Market AI Trade at a Crossroads
Good morning and welcome to First Trade. The Supreme Court is skeptical about President Trump’s tariffs. It’s still early innings, but watch this space for what this means about the future of the market.
Rundown
But first, traders are getting tired.
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Market musings
AI exhaustion is real
The old saying goes that something happening once is an accident, twice is a coincidence, and three times is a pattern.
Given developments in the AI space in recent days, it looks like we have a full-fledged pattern of skepticism. It’s created an inflection point of sorts for a trade that seemed unstoppable as recently as last Tuesday, the last time the S&P 500 closed at record highs. Yes, stocks are coming off a strong day, but it feels like something has shifted under the surface.
While three makes a pattern, I’ll do you one better. Detailed below are four examples of AI exhaustion, in reverse chronological order, dating back one week:
1. Michael Burry comes out of hibernation to short some giants
If Burry is emerging from the woodwork, you know something is afoot. The legendary “Big Short” investor dusted off his X account this week to compare the AI boom to the dot-com bubble. He also disclosed short wagers against market darlings Nvidia and Palantir.
While Burry has made a series of bearish bets in recent years that haven’t come to fruition, he certainly knows his way around an unsustainable bubble, and his views are an important contribution to the broader groundswell.
2. Sky-high valuations suddenly matter
When Wall Street CEOs gathered at an investment summit in Hong Kong this week, few expected the high-profile guests to take a two-by-four to bullish stock portfolios. But that’s exactly what Morgan Stanley’s Ted Pick and Goldman Sachs’ David Solomon did.
They warned of a 10-20% drawdown in equities, characterizing it as a necessary and normal consolidation. In a different environment, the comments might’ve passed without incident. But with investors starting to question AI valuations, it confirmed some latent worries.
On this same subject…
3. Palantir sells off big after crushing every conceivable earnings metric
A record quarter? Meh. An increased profit forecast? Yawn. All anyone seemed to care about after Palantir’s third-quarter earnings was how absurd the company’s valuation was, with the stock up 174% year to date. The actual results rendered were irrelevant, offering a clear sign of exhaustion, and a desire from investors to regroup and reassess.
4. Meta’s AI-spending pledge sends its stock tanking
Loyal readers of First Trade will recognize this as a familiar trope that’s been mentioned a handful of times already. Well, it really is that big of a deal.
You know the story by now: Meta — already spending tens of billions on AI — said it plans to spend even more in 2026. That might’ve excited investors a few months ago, but this time around the forecast landed with a thud, and the stock tumbled. The message from investors was clear: we want tangible results, not an opaque money pit.
Not convinced? Allow me to offer a visual aid that’s specific to OpenAI’s role in the fervor.
On the move
The headline takeaway from this chart is how much Oracle’s stock has come back down after a 36% single-day spike on Sept. 10, which was driven by giant new AI-cloud deals and the future revenue they could bring.
That day, Oracle announced almost half a trillion dollars in new cloud contracts. A big chunk of that was from an OpenAI deal to develop data-center capacity. OpenAI essentially played kingmaker, as it has so much lately.
Since then, OpenAI has unveiled a string of other giant AI infrastructure agreements. With doubts creeping in about OpenAI’s ability to pay for all this, investors are discounting these deals. Hence the drop in Oracle shares.
BI market mix
MVP of the week
Sam Hodde/Getty Images
This recurring section will highlight individuals who have dominated the week in markets.
This week’s First Trade MVP is Miriam Adelson, the widow of Sheldon Adelson, founder and chairman of the casino company Las Vegas Sands, of which she and her family own a half-stake.
This week’s entry would be more aptly titled “MVP of the past two weeks,” because LVS has been on a 24% tear over that period, since earnings after the closing bell on Oct. 22. That includes a 5% increase this week.
LVS beat revenue forecasts, and saw especially strong growth at its Marina Bay Sands resort, which contributed to a 56% year-over-year sales increase for Singapore operations.
The move has lifted Adelson’s net worth to $39.9 billion, making her (and her family) the 45th-richest person in the world, according to Forbes data.
And did I mention that she’s the majority owner of the Dallas Mavericks? No word on how she feels about trading Luka Dončić for pennies.
Pro tip
Business Insider’s Will Edwards highlights investing recommendations pegged to the biggest trends in markets.
One of the biggest questions in the market right now is how effective AI will be in raising profit margins.
Tech firms are dumping tens of billions of dollars a year into building out infrastructure to support the technology, helping to propel US economic growth and stock-market gains. But will it ever pay off?
For one company, the answer is already yes. And its stock is already seeing the benefits in a big way.
Shares of CH Robinson (CHRW), a freight logistics firm, are up 49% year-to-date. After the company’s third-quarter earnings report last week, the stock jumped about 20% in a single day.
The stock is moving so dramatically because the company has begun using generative AI, said Travis Prentice, the founder of the Informed Momentum Company.
AI is able to provide price quotes, book appointments, respond to emails, and process orders for the firm, allowing its shipments per person per day to have increased by 40% since 2022. Meanwhile, CH Robinson has reduced its employee base by more than 10%, boosting margins amid a 12% decline in expenses.
“Not the most sexy business in the world, but when everyone talks about AI and there’s no ROI with AI, this is a massive exception to the rules,” Prentice told BI. “It’s driving productivity gains of like 40-50%.”
“That’s a story that no one’s really talking about — AI is actually improving business operations,” he continued. “They’re one of the outliers, but I’m sure there’s gonna be a lot to follow when they see the gains that they’re having.”
— Will Edwards
Joe Ciolli, executive editor and anchor, in Chicago. Akin Oyedele, deputy editor, in New York. William Edwards, senior reporter, in New York. Steve Russolillo, chief news editor, in New York. Huileng Tan, senior reporter, in Singapore.
