Last week offered a reminder that a promising investment theme can still experience a difficult stretch.
Technology and AI stocks came under pressure as investors questioned how parts of the industry will finance their next phase of growth. Meanwhile, consumers continued spending, other areas of the market held up better and our investment signals remained unchanged.
This week, we’ll look at what changed, the positives that still support the technology opportunity and what we are watching next.
🔑 This Week’s Key Takeaway
Technology had a difficult week, but the broader investment picture is more balanced than the headlines suggest.
Concerns about financing the next phase of AI expansion pressured some of the market’s biggest winners. At the same time, other areas held up better, consumers continued spending and our primary stock-market signals remained positive.
The AI opportunity still deserves a place in the discussion alongside the risks. The question is whether investment and earnings can continue supporting expectations, and whether recent weakness stays concentrated or becomes more widespread.
🤖 What Changed in Technology and AI
The S&P 500 declined last week as investors became more concerned about how parts of the AI industry will finance their ambitious expansion plans.
Weakness in debt issued by CoreWeave, which provides computing infrastructure for AI, raised questions about access to capital for smaller companies in the industry. Higher borrowing costs can make it more difficult to build data centers and purchase equipment.
Why does this matter?
AI investment has supported earnings across semiconductors, cloud computing and related infrastructure. If financing becomes harder to obtain, spending could grow more slowly than investors expect. When expectations are high, even a slowdown in growth can pressure stock prices.
Those concerns warrant attention. However, they do not yet establish that AI demand is collapsing or that the investment cycle has ended.
📈 The Positives Behind the AI Opportunity
There are several reasons we continue to view technology and AI as important investment opportunities, even after a difficult week.
The strongest companies have greater financial flexibility.
Large platforms such as Microsoft, Alphabet, Amazon and Meta are in a different financial position from smaller businesses that rely more heavily on raising outside capital. These larger companies are better insulated from changes in capital availability. Trouble at one provider should not automatically be applied to the entire industry.
The concern is about the pace of spending, rather than spending disappearing.
Investment in AI infrastructure remains an important support for corporate earnings and economic activity. Investors are questioning how quickly that investment can keep growing and what returns it will produce. Those are meaningful questions, but they are different from evidence that the underlying opportunity has gone away.
The latest weakness has not spread evenly across the market.
Since October 7, the equal-weight S&P 500 had gained ground while the traditional index declined. Financials and consumer discretionary stocks also advanced over that period. That broader participation is encouraging, although it does not guarantee that weakness will remain contained.
Our perspective: The long-term potential remains meaningful, but investment potential and stock-price performance will not always move together from week to week.
We remain attentive to valuations, financing conditions and earnings expectations. Upcoming results and management commentary will help test whether demand and spending plans continue to support the outlook.
🏦 Inflation Is Still Part of the Story
September consumer prices rose 3.7% from a year earlier, while core inflation, which excludes food and energy, increased 2.6%. Both were above expectations, and producer prices also showed renewed pressure.
Yet the 10-year Treasury yield fell over the week. That decline reflected concerns about slower AI investment and potentially less borrowing to finance it, rather than evidence that inflation had been resolved.
Lower yields were welcome, but the reason behind the decline matters.
Federal Reserve commentary did not meaningfully increase expectations for an October rate hike. Still, persistent inflation leaves additional tightening a risk and continues to create challenges for interest-rate-sensitive investments.
🛒 The Consumer Continues to Support Growth
Despite higher prices and borrowing costs, the latest data continued to show an economy that is expanding.
- Retail sales rose 0.8% in September, above expectations.
- The retail sales control group rose a more modest 0.1%, showing less strength beneath the headline.
- Regional manufacturing surveys remained consistent with expansion.
- Weekly unemployment claims remained historically low, helping support household income.
Energy costs remain a pressure point. Brent crude finished the week near $110 per barrel as Middle East conflict and shipping disruptions threatened supply. Sustained increases could add to inflation and reduce the amount consumers have available for other purchases.
🧭 Inside Advance & Protect
Each week we explore one principle behind our investment philosophy and how it connects to the decisions investors face.
Why We Believe in Active Management
A buy-and-hold approach generally keeps an investor invested through market advances and declines, with periodic rebalancing to maintain a long-term allocation. Passive index funds are often used for their broad exposure and low costs.
Advance & Protect actively manages exposure as market conditions change. We monitor indicators to guide when we maintain, increase or reduce risk. We can hold index ETFs while actively managing how much exposure the portfolio takes.
Why do we believe so strongly in that flexibility?
Because the investments supporting a financial plan must serve real needs. A substantial decline can be especially disruptive for someone nearing retirement or withdrawing income, when selling investments to cover expenses can make recovery more difficult.
We believe a defined process for adjusting exposure can help investors navigate those challenges with greater discipline. Our goal is to participate when trends are favorable and respond when our indicators show meaningful deterioration.
What Active Management Looks Like in Practice
- Monitor whether market conditions are improving or weakening.
- Maintain exposure when the indicators continue to support it.
- Adjust risk when the signals warrant a change.
Even with last week’s volatility, our signals went unchanged. Maintaining positioning is consistent with an active approach when the evidence continues to support it. Activity alone is not the objective.
Advance & Protect Insight: We favor an active process because it provides a disciplined way to respond as risks change while keeping investment decisions connected to the financial plan.
👀 What We’re Watching This Week
🏭 October Business Activity
Friday’s preliminary manufacturing and services surveys will provide an early national look at October growth. Their price measures will be especially important after last week’s inflation reports.
🤖 Earnings and AI Investment Plans
Investors will look for evidence that demand, financing and expected returns continue supporting AI investment. Commentary from the larger platforms will help show whether recent concerns are spreading.
💼 Employment and Energy Prices
Weekly jobless claims will offer another check on household resilience, while oil prices remain an important link between geopolitical developments, inflation and consumer spending.
🧭 Final Thoughts
Last week brought a legitimate test for technology and AI investors. Financing costs and high expectations matter, and recent weakness should not be dismissed.
The positives also remain relevant. The largest platforms have greater financial flexibility, AI investment continues to support economic activity, and other areas of the market have shown resilience. Consumer spending and employment remain important supports as well.
We continue to see opportunity while recognizing that the path can include uncomfortable periods.
Our focus remains on evaluating the evidence, monitoring the risks and making adjustments when our process calls for them.
Have a great week.
Ready to Explore Advance & Protect?
If you would like to explore how an active investment process could fit your retirement income needs and broader financial plan, we would be happy to schedule a complimentary consultation.
Warm regards,
The Barzideh & Nadeau Wealth Management Team
Thanks for reading! As always, we’re here to help you navigate these markets with confidence and clarity. Stay safe and informed—see you next week.
