AI Stocks Stumble Amid Bubble Fears, SpaceX Aims for Orbit, and Cannabis Shares Soar
Market Snapshot
- 📉 S&P 500: 6,827 (-1.07%)
- 📉 Dow Jones Industrial Average: 48,458 (-0.51%)
- 📉 NASDAQ Composite: 23,195 (-1.69%)
- 📈 US 10-Year Treasury: 4.19% (+0.05%)
- 📈 Gold: $4,300 (+0.43%)
- 📈 Silver: $63.69 (+2.86%)
- 📉 Bitcoin: $88,688 (-1.75%)
- 📉 Ethereum: $3,090 (-0.82%)
- 📈 FTSE 100 (U.K.): £9,738 (+0.76%)
AI & Technology Stocks Face Headwinds
US stocks pulled back from recent highs, driven by a significant sell-off in the technology sector as concerns over an artificial intelligence bubble intensify. The Nasdaq Composite dropped more than 1.5%, dragged down by major AI-related stocks. Broadcom shares fell over 11% despite reporting better-than-expected revenue, as investors focused on lower margins. The decline triggered a sympathetic downturn in other AI stocks, including Nvidia, Oracle, and Advanced Micro Devices.
Market sentiment is shifting, with some Wall Street analysts noting a rotation away from the high-flying tech giants and towards undervalued cyclical sectors, blue-chip stocks, and small-caps. This is happening as investors grapple with the high valuations and capital intensity of the AI infrastructure boom.
The sector is also contending with a major supply chain squeeze. Surging demand for memory from AI servers has caused prices for key components to increase by as much as 170% over the last year. This has led computer manufacturers to pass on costs, with Dell increasing prices by 15-20%. The rising cost of storage has also raised concerns for companies like Nintendo, whose stock has fallen on fears that margins for its upcoming Switch 2 console could be impacted. Conversely, memory and storage firms are thriving, with SanDisk's stock surging 472% this year, earning it a place in the S&P 500.
Global Economic Landscape
China's Economy Shows Deepening Slowdown
China's economy is exhibiting further signs of a slowdown with significant international repercussions. Sales of luxury cars from European manufacturers are declining as Chinese consumers opt for cheaper vehicles. Broader economic data, including retail sales and industrial production, missed forecasts in November. The property sector remains a key concern, as China Vanke, a major state-backed developer, faces a potential default after bondholders rejected a payment extension plan. A default could trigger a repricing of credit risk across Asia.
US Economy Faces Key Data Amid Mixed Signals
The US economy is presenting a complex picture as the market awaits crucial data. This week, delayed jobs data for October and November, along with November's Consumer Price Index (CPI), will be released, providing an important update for the Federal Reserve. The Fed, which recently cut rates, has shifted its focus to the labour market, and weak jobs figures could support further monetary easing in 2026.
The upcoming data is also significant in the context of President Trump's potential appointment of a new Fed chair to succeed Jerome Powell. Former Fed Governor Kevin Warsh and National Economic Council Director Kevin Hassett have been identified as top contenders. President Trump has reiterated his belief that the Fed chair should consult the White House on interest rate decisions.
While top-line data has shown wage growth outpacing inflation, many households are struggling. GoFundMe reported a 17% increase in campaigns for basic necessities, indicating that rising costs for housing, food, and electricity are squeezing budgets, especially for lower-income workers. On a positive note, the housing market is expected to see improved affordability in the coming year, with forecasts of a drop in mortgage rates and a slowdown in price growth.
Corporate Developments
SpaceX Eyes Record IPO with Orbital AI Ambitions
SpaceX is preparing for a potential initial public offering in 2026. A recent secondary share sale pushed its valuation to near $800 billion, making it larger than OpenAI and ByteDance. The high valuation is linked to the growing demand for space-based infrastructure to support the AI sector. As terrestrial power grids face strain, tech companies are exploring moving data centres into orbit to utilise constant solar energy, a strategy that could also link Elon Musk's other ventures, xAI and Tesla.
Cannabis Stocks Surge on Reclassification Hopes
Cannabis stocks, including Tilray Brands and Canopy Growth, soared by over 44% and 52% respectively, following reports that the White House is preparing to reclassify marijuana from a Schedule I to a Schedule III substance. An executive order could be signed as soon as this week. The change would significantly ease tax burdens under the 280E rule and improve access to capital for cannabis operators. While the move is considered a major step, industry experts note that further congressional action would be required for full legalisation.
Other Notable Corporate News
- iRobot Files for Bankruptcy: The maker of the Roomba vacuum has filed for Chapter 11 bankruptcy. The restructuring will hand 100% of the company's equity to its primary manufacturer, wiping out current shareholders.
- Lululemon Shares Rise: The athletic apparel company's shares climbed nearly 10% following the announcement of its CEO's departure, with investors optimistic about new leadership.
- ServiceNow Plans Acquisition: Software firm ServiceNow is set to acquire Israeli cybersecurity company Armis in what will be its largest acquisition to date.
- Chubb-AIG Merger Speculation: The insurance industry is watching for a potential combination of Chubb and American International Group (AIG), though both companies have denied that any formal approach has been made.
Commodities Market Rallies
Precious and industrial metals have had a strong year amid economic uncertainty. Silver has been a standout performer, gaining over 110% year-to-date as investors seek safe-haven assets. Copper has also rallied to record highs, with its price expected to continue climbing into 2026. The surge is fuelled by supply disruptions and immense demand from the energy transition and AI sectors, which require vast quantities of the metal for infrastructure.
Cryptocurrency Market Update
Bitcoin's price slipped below $90,000 as traders took defensive positions ahead of a week of significant US economic data releases and a potential interest rate decision from the Bank of Japan. Meanwhile, the regulatory landscape for digital assets is becoming more defined. Do Kwon, founder of the collapsed Terra ecosystem, was sentenced to 15 years in prison. In a more constructive development, the US Securities and Exchange Commission (SEC) held a roundtable to discuss how privacy-enhancing technologies on the blockchain can coexist with anti-money laundering regulations.
In a major step towards integrating traditional finance with blockchain, the Depository Trust and Clearing Corporation (DTCC) received SEC approval for a pilot programme to tokenise securities, including major stocks and US Treasuries. Elsewhere, Bhutan launched a gold-backed digital token on the Solana blockchain, and payment processor Stripe has seen its stablecoin transaction volume on the Polygon network grow to nearly $9 million per month, signalling rising merchant confidence.
NOTE: This content is for informational and educational purposes only and does not constitute financial advice. Always do your own research. Not financial advice (NFA).