Market action suggests investors are falling out of love with the artificial-intelligence trade, but here’s the rub—earnings from Taiwan Semiconductor Manufacturing (TSMC) and industry surveys indicate spending on the
technology is only set to grow. So someone is getting it wrong on AI.
Judging by the performance of tech stocks so far in 2026, this is the year when AI will run out of steam. Shares of chip leader Nvidia have
drifted since last summer while Microsoft is at its lowest level in seven months. Things are even worse for pure-play software companies—players such as Salesforce, which has championed AI agents, are on the brink of multiyear lows.
On the other hand, TSMC—the dominant manufacturer of AI chips—is planning record capital expenditure, which it promises is justified by months of checks with major customers. And industry surveys of company executives say AI is the top IT budget priority with spending
only set to increase.
How to reconcile these two narratives? One argument is that investors recognize AI spending will continue to increase, they just don’t believe it is money well spent. Bank of America strategists estimate borrowing in the tech sector could hit as much as $950 billion over three years. The growing number of circular financing deals and off-balance-sheet arrangements used to fund investment naturally attracts skepticism.
Investors have been fleeing anything AI-related in a rotation toward value stocks and small companies. But shareholders in some sectors such as utilities and data-center infrastructure shouldn’t particularly care whether the AI spending is sensible, only that it is set to last—and all the indications so far are that the boom has a long way to go.
A
rebalancing of stock portfolios and a broadening of the market rally is healthy. But investors should be open to the possibility that some AI stocks are now on offer at bargain prices.
—Adam Clark
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Trump’s 25% Tariffs on Chips Only Matter to Nvidia and AMD
President Donald Trump made official his earlier talk that Nvidia would pay the U.S. 25% of its H200 chip sales to China. An executive order signed Wednesday applied tariffs to chips imported to the U.S. that aren’t
used here for AI but are exported to another country.
- That’s a practice called transshipping. Such chips, including Nvidia’s H200 and Advanced Micro
Devices’ MI325X chip, would be subject to a 25% tariff under the order, which applies the levies to a very narrow category that the administration views as important to its AI and technology policies.
- But the White House left a broader tariff on the table, saying the Commerce Department recommended broader chip
tariffs at a significant rate, but with potential to offset them with investments in U.S. chip production or the U.S. chip supply chain. This would likely limit the scope of tariffs.
- The order came under a national-security provision of trade law referred to as Section 232. Investors are awaiting a Supreme Court decision on the legality of Trump’s tariffs imposed under emergency powers. A ruling likely wouldn’t affect tariffs imposed under Section 232.
- A second executive order on Wednesday addressed critical minerals. The administration didn’t impose tariffs on critical minerals but instead said it was negotiating with trading partners to reduce U.S. reliance on other countries for rare-earths and the like. The door remains open to tariffs.
What’s Next: Treasury officials have met with France, Australia, South Korea, and the U.K. around critical minerals as the U.S. looks to secure its supply chain. Henrietta Treyz, head of economic policy research at Veda Partners, sees Wednesday’s moves as preparation if the Supreme Court rules against some of Trump’s tariffs.
—Reshma Kapadia and Tae Kim
Oil Prices Slide as Trump Rows Back on Iran
Oil prices have swung sharply in recent weeks. Benchmarks were falling Thursday after President Trump said that “killing in Iran is stopping,” in an apparent de-escalation of tensions between Washington and
Tehran.
- Following Trump’s remarks, continuous futures contracts for Brent crude retreated by about 3.5% to roughly $64.22 a barrel. West Texas Intermediate was down by 3.3% to $59.95.
- Crude prices had been on a tear over the course of the five trading days ending Wednesday, as the Trump administration considered military action against Iran.
- Earlier this week, the president also said he would impose a 25% tariff on any country doing business with Iran in the wake of deadly anti-government protests.
- On Tuesday, Citigroup raised its projection for international oil prices over the next three months to $70 a barrel, up from $65, because of the violence in Iran and a change in the war between Russia and Ukraine.
What’s
Next: Traders look set to refocus their attention on market fundamentals as crude inventories in the U.S. climbed more than analysts expected last week. Still, oil traders should prepare for more geopolitical volatility with Russia’s war in Ukraine and U.S. military action in Venezuela potential powder kegs for the industry.
—Alex Kozul-Wright
Consumers Continue to Borrow and Spend Despite Affordability Concerns
Despite talk about an affordability crunch affecting many households, comments from executives during bank earnings this week point signal that consumers continue to borrow and spend at a decent pace in the final months of 2025 despite the uncertainties caused by a weakening job market and tariffs.
