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The investor romance with technology stocks (and those focused on artificial intelligence in particular) hit some of the largest setbacks in November since the ‘Deepseek scare’ earlier this year. These worries surfaced even though industry leader and ‘poster child’ for the AI boom, NVidia released their third quarter earnings report. They once again blew past expectations, raised guidance for the next quarter and continued to talk about a robust backlog and ongoing strong demand from all their customers for the next few years at least as they scale up data centres and AI applications. The company maintains better than 90% market share for GPUs with strong gross margins of over 70%. Stocks opened up strongly the next day and then did a major downside reversal around midday, giving up all the early gains and finishing sharply lower. The technical picture was also very disturbing on that 200-point reversal on the S&P500, with decliners leading advancers by a 3 to 1 ratio and new lows on the NYSE also tripling the number of new highs. While the S&P500 did manage to recoup those losses and finish flat on the month, the ‘technology heavy’ Nasdaq Index had a rougher time, dropping almost 2%. The more interesting stories, though, were not in the indices but in the individual large cap stocks. Nvidia had its worst month this year, falling over 12% despite the earnings beat. Other big ‘chip’ names were also down, with industry stalwart AMD losing almost 20%. Amazon and Microsoft were also under pressure, with each dropping 5%, while some former highflyers got their wings clipped, with Palantir giving up over 20% on the month and Coreweave dropping almost 50%. The biggest ‘canary in the coal mine’ though was Oracle. Larry Ellison’s data base software giant had surged over 30% in September on news that it would be receiving orders from OpenAI that would lead to over $300 billion in sales over the next five years. Further investigation into the real sustainability of that spending as well as the ‘creative’ financing proposed to pay for it caused Oracle to give back all those gains and then some in the past two months, dropping almost 40% from that October peak. The partial offset to all of this was Alphabet, which rose over 12% on the month as they got rave reviews on their newest version of their AI model, Gemini, which offset much of the worry that their core search business (Google) was going to be marginalized as AI usage increased. The model includes new tools such as Deep Think, for projects that require more stringent reasoning; generative user interfaces; and improved “vibe coding” for software developers, among other benefits. Gemini has been closing the gap with ChatGPT, with 650 million monthly active users to ChatGPT’s 800 million weekly active users.
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