The stock market started this week off respectably but quickly took a turn for the worse as disappointing earnings reports from multiple major players exposed growing cracks in the AI trade.
Alphabet, Google’s parent company, fell -13% on Thursday in its largest one-day drop on record.
Intel plunged a mind melting -29% today as their outlook fell below expectations.
Reddit also dropped -29%, even as its financial results were strong, as concerns regarding negative impacts from AI pushed forward expectations lower.
The AI scare reverberated throughout the space as the InvesTech Data Center Index plunged -8.6% today.
Days like this reveal just how quickly investor sentiment can change in a speculative market when the item of investors’ affection (AI in this case) is called into question. There are a few important things to remember:
- Don’t join the panic. Emotional investing is never a good idea.
- Take comfort in the fact that investing is never an all or nothing decision.
- If you hold highly speculative stocks, make sure you have an exit plan. Don’t get caught holding a losing bet all the way down.
Despite widespread losses in the Indexes, the Model Fund Portfolio was positive today proving that defensive value and resilience pay off.
As we step into the next month, keep in mind that large down days are typically accompanied by volatility in both directions, and a strong up day does not mean the danger has passed. Stay vigilant.