Knowledge Center
Market Currents – 11/9/26
- A Month of Tricks and Treats. October began with markets near record highs but ended with a decidedly different mood. Technology stocks, which had powered much of the market’s advance, came under increasing pressure as investors began questioning the enormous spending behind the artificial intelligence boom. The selling intensified in early November, with some of the biggest names in technology suffering sharp declines. Yet beneath the unsettling headlines, something interesting was happening. Much of the weakness was concentrated in the stocks carrying the highest expectations, while other parts of the market were holding up remarkably well. With so many developments reshaping the AI landscape, we thought it was worth exploring a few of the more consequential ones this month.
- AI’s Financing Squeeze. Paying for the AI buildout is becoming as big a story as the technology itself. Spending on data centers, chips, and supporting infrastructure has grown so rapidly that some of the biggest technology companies are now investing more than their businesses generate in cash. To sustain this expansion, companies are turning to debt and equity markets, fueling a wave of borrowing across the AI industry. But investors are becoming more skeptical, particularly of financially weaker players, and are demanding higher yields to compensate for the growing risks. The concern now is whether more expensive and harder-to-obtain financing could eventually force companies to scale back their ambitious spending plans.
- A Changing of the Guard. While technology stocks struggled, other sectors of the market enjoyed a surprisingly strong October. Most sectors finished the month higher, with healthcare, consumer staples, and utilities attracting renewed investor interest. Smaller and mid-sized companies also held up well, a notable change after years of market leadership dominated by a handful of technology giants. Encouragingly, the shift has been supported by solid corporate earnings across a wider range of industries. Rather than abandoning stocks altogether, investors appear to be finding opportunities in businesses that have spent much of the past few years in technology’s shadow.
- AI Meets Main Street. Another development in the AI expansion is playing out far from Wall Street. Across the country, the rapid construction of massive data centers is raising concerns among local communities about electricity costs, water consumption, and the strain on existing infrastructure. The November elections brought these issues into sharper focus, with several communities voting to restrict new developments. While some oppose these projects outright, others recognize the potential benefits of substantial investment, jobs, and tax revenue, but want assurances that developers will shoulder their share of infrastructure costs, manage water usage responsibly, and involve local residents in the planning process.
- Keeping Perspective. The recent volatility serves as a reminder that even the most promising investment themes are not immune to changing expectations. We remain convinced that AI will be a transformative force in the years ahead, but after years of exceptional gains, valuations in certain parts of the technology sector have left little room for disappointment. We have been selectively taking profits and reducing our exposure to some of these names, redeploying proceeds into overlooked businesses in other sectors where we see better value. We believe investment discipline, thoughtful diversification, and a willingness to look where others are not will continue to serve our clients well. As always, we are grateful for the trust you continue to place in us.