Stocks finished mixed today, with the Dow down 0.36%, S&P 500 essentially flat, Nasdaq up 0.45%, and Russell 2000 gaining 0.51%. The S&P 500 managed its fourth straight gain, while the Nasdaq closed at another record high. But the market was far from uniformly strong.
Semiconductors and memory stocks led as enthusiasm around AI continued, while banks, brokerage firms, financial services, software and entertainment stocks struggled. Homebuilders, airlines, restaurants and apparel companies were among the stronger groups. Meanwhile, WTI crude fell another 2.0%, extending Monday’s roughly 4% decline and providing some welcome relief from one of the market’s biggest recent inflation concerns.
AI Keeps Broadening Beyond the Biggest Tech Companies
AI remained the market’s strongest underlying theme. Semiconductors and memory stocks rallied as investors focused on growing demand for the computing infrastructure needed to actually run AI applications.
That distinction is becoming increasingly important. The AI story is no longer just about building increasingly powerful models. Companies are now releasing less expensive versions of advanced models, which could make AI available to far more businesses and consumers.
More usage means more demand for the chips, memory, networking and data-center capacity required to run those models. Alibaba also introduced a new AI chip, while PayPal announced a partnership with Meta’s Muse AI platform. Shopify continued to benefit from its own Muse partnership.
The broader message is that AI is moving from development toward widespread adoption, potentially expanding the opportunity well beyond the handful of companies that dominated the first phase of the AI boom.
But AI Is Also Creating New Winners and Losers
The other side of that story is disruption. Meta’s Muse platform has increased investor concern about businesses that depend on customers navigating traditional websites, marketplaces or intermediaries.
Financial companies were particularly weak today, including brokerage, wealth-management and insurance-related businesses. Charles Schwab fell more than 6% as investors considered how personal AI agents could eventually change the way consumers access financial products.
Similar questions are emerging around travel websites, media subscriptions, job boards, fitness platforms and other businesses that rely on consumers directly interacting with their services.
We are therefore entering another stage of the AI investment cycle.
The question is increasingly shifting from “Who benefits from building AI?” to “Which existing business models could AI disrupt?”
Falling Oil Prices Offer Some Relief
Energy prices continued moving in the opposite direction.
WTI crude declined for a fifth consecutive session as concerns about Middle Eastern supply eased somewhat.
Saudi Arabia restarted its East-West pipeline, which had been shut following drone attacks earlier this month. The pipeline had been rerouting roughly 4 million barrels of oil per day around the Strait of Hormuz, making its restart important for global supply.
There were also renewed diplomatic discussions surrounding the conflict and the possibility of restoring more normal shipping through the Strait of Hormuz, although substantial uncertainty remains.
For markets, the important development is simpler: oil has finally begun moving meaningfully lower after its extraordinary September surge.
If that continues, it could reduce pressure on gasoline and diesel prices, help consumers and businesses, and make the Fed’s inflation problem somewhat easier.
The Economy Sends Mixed Signals
Today’s economic data offered a mixed picture.
Private payroll estimates continued improving, suggesting the labor market remains relatively healthy.
Manufacturing was weaker. The Richmond Fed manufacturing index slipped into contraction territory, while employment weakened and businesses reported higher input and selling prices.
That combination captures the Fed’s challenge fairly well.
Parts of the economy are slowing, but inflation pressures remain stubborn. Policymakers therefore have little incentive to quickly reverse last week’s rate hike.
Treasury yields were relatively stable today, which helped prevent interest rates from becoming another major headwind for stocks.
Here’s Our Take
Today’s market reinforces an important shift taking place beneath the surface.
The AI story is getting broader but also more disruptive.
Lower-cost AI models and rapidly expanding consumer applications could dramatically increase demand for computing infrastructure. That remains positive for semiconductors, memory, networking, data centers and other parts of the AI ecosystem.
At the same time, investors are beginning to ask harder questions about which traditional businesses could lose customers, pricing power or relevance as AI agents become capable of doing more on consumers’ behalf.
That means the next phase of the AI trade may become much more selective.
Meanwhile, falling oil prices are providing exactly the kind of macroeconomic relief markets needed after September’s energy shock. If crude continues declining and Treasury yields remain relatively stable, investors can focus more heavily on corporate earnings and AI adoption rather than inflation and interest rates.
That combination, strong AI investment, lower energy prices and stable bond yields, would be a considerably healthier backdrop for stocks.
But today’s mixed market also shows that the benefits will not necessarily be evenly distributed. AI increasingly looks capable of creating both significant winners and meaningful disruption at the same time.
For investors, understanding who benefits from AI adoption, and whose business model it threatens, may become just as important as understanding the technology itself.
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