In this episode of Glass Half Full, Ryan Detrick, Chief Market Strategist at Carson Group, and Sonu Varghese, Chief Macro Strategist at Carson Group, break down a rough week for tech and what it means for the market theme they call “AI or Bust.”
The S&P 500 fell about 2% last week, one of its worst weeks of the year, as tech dropped close to 8%. Yet 10 of 11 sectors outperformed the index, and healthcare was up more than 3.5%. Sonu explains that tech and tech-adjacent stocks now make up roughly half of the S&P 500, so the “broad” index is no longer all that broad. Ryan adds that the NYSE Composite finished the week higher, Europe was up, and one day last week saw 378 S&P 500 stocks rise even as the index fell. They discuss the scale of AI spending, which is larger than the late-90s tech boom and the 19th-century railroad build-out. About half of first-half GDP growth came from AI spending. They also cover why investors are asking whether all of that spending will pay off, and how worries over softer AI revenue and neocloud debt added to the pressure.
Sonu then shows how AI is reaching the real economy: AI-related industrial production is running at an 18% annualized pace, printed circuit board assemblies are up 48%, and computer storage devices are up 69% over the past three months. That helps explain hotter inflation and higher bond yields, and why this is an inflationary tech boom rather than the disinflationary one of the 1990s. The 10-year yield dropped from about 5.3% to below 5.1% in a day, and Ryan notes that bonds finally provided some diversification when stocks sold off. They share that Carson Group remains overweight equities and slightly overweight tech, but not wildly so. They close by previewing earnings season, the hyperscalers’ spending plans, and the 2027 outlook.
Key Takeaways
- The S&P 500 is no longer as broad as it looks. Tech and tech-adjacent stocks make up roughly half of the index, so a nearly 8% tech drop pulled the S&P 500 down about 2% even though 10 of 11 sectors outperformed it.
- AI is driving the economy, and the risks are tied to it. AI spending is larger than the late-90s boom and accounted for about half of first-half GDP growth, and AI-related industrial production is running at an 18% annualized pace. The more concentrated the market becomes, the larger the potential fall if that spending doesn’t pay off.
- This tech boom is inflationary. AI-related bottlenecks, along with energy prices, are putting upward pressure on inflation and yields. We think yields would likely fall significantly only if the AI wave were to end, which is why everything from stocks to bonds to commodities looks like one big trade.
- We stay constructive but diversified. We remain overweight equities and slightly overweight tech, but not wildly so, because of the “escalator up, elevator down” risk. We want to ride the AI wave while avoiding the wipeout, and last week showed that bonds can help with that.
Jump to:
0:00 – Tech Wreck Sets The Stage
2:05 – AI Or Bust Defined Clearly
3:35 – When The Index Hides Breadth
6:50 – AI Spending Hits Real Economy
8:05 – Inflation Bottlenecks And Bond Yields
12:19 – Diversification Wins And What’s Next
Connect with Ryan:
- LinkedIn: Ryan Detrick
- X: @ryandetrick
Connect with Sonu:
- LinkedIn: Sonu Varghese
- X: @sonusvarghese
The views stated in this podcast are not necessarily the opinion of Cetera Wealth Services, LLC, or CWM, LLC. and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
Ryan Detrick and Sonu Varghese are non-registered associates of Cetera Wealth Services LLC.
A diversified portfolio does not assure a profit or protect against loss in a declining market.
Please note: Cetera Wealth Services, LLC is not registered to offer direct investments into commodities or futures. Instead, we provide access to this asset class via mutual funds, exchange-traded funds (ETFs) and the stocks of associated companies. Investments in commodities may be affected by the overall market movements, changes in interest rates and other factors such as weather, disease, embargoes and international economic and political developments. Commodities are volatile investments and should form only a small part of a diversified portfolio. An investment in commodities may not be suitable for all investors.
The return and principal value of bonds fluctuate with changes in market conditions. If bonds are not held to maturity, they may be worth more or less than their original value.
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