Change Is Afoot
The market leaders dip again... A bear market for one stock... The rotation continues... The consumer is hurting... AI spending isn't... This can't go on forever... Stansberry Investor Hour with J.C. Parets...
Another 'rotation' sign...
Market-leading tech stocks were down again today.
Nvidia (NVDA) was down by more than 1% much of the day before clawing back losses, and semiconductors were down as a group. AI company Palantir Technologies (PLTR) lost another 1%. The stock has now been down for six straight days. And on an intraday basis, it fell into its own bear market – down 20% from its recent all-time high.
Meanwhile, the market-cap-weighted benchmark S&P 500 Index was down 0.2%, and the tech-heavy Nasdaq Composite Index lost 0.7%.
As we wrote yesterday, this could be the start of a "rotation" out of tech stocks and into more "defensive" sectors.
Typically defensive sectors like consumer staples and health care gained today. The equal-weight S&P 500 (which gives equal weight to each of the index's 500 companies) was down just 0.1%, and the Dow Jones Industrial Average was little changed.
Rotation isn't a bad thing. Some would say it's even a distinguishing feature of a bull market. (On the other hand, exiting – or broad selling in the name of liquidity – is not a good thing.)
Still, as I (Corey McLaughlin) mentioned yesterday, a sell-off in the big winners of this bull run and the popular tech and AI names that have increasingly filled portfolios and trading accounts deserves some attention.
As we'll explain, it could be an early sign of things to come. But right now, it means a "correction is unfolding," as our Ten Stock Trader editor Greg Diamond put it.
What will this 'correction' look like?...
In his free Diamond's Edge Live video today, Greg explored whether this correction will be "volatile and intense" or "more of a sideways move."
Using his technical analysis approach, Greg shared a few possible scenarios that could play out over the next few weeks. He also noted that August 13 looks like it was a short-term high for many sectors, like semiconductors. So he warned against "chasing" these stocks higher.
While it often seems like market action is disconnected from reality, a pullback in overvalued stocks and profit-taking on Wall Street – after nearly three years' worth of average gains for the S&P 500 since mid-April – seems reasonable... especially given what appears to be going on with the economy right now.
Another telling earnings report...
Yesterday, we wrote about Home Depot's (HD) latest earnings report signaling sagging activity in the residential real estate market.
Today, we got a look at how the U.S. consumer is doing with Target's (TGT) financials. It tells a similar "slowdown" story...
While sales and earnings both came in above Wall Street's estimates for the company's second quarter, sales fell nearly 2% from the same period a year ago. It marked the sixth year-over-year decline in the past nine quarters. At $25.2 billion, Target's net sales for the second quarter have only grown 0.5% since the same quarter in 2021.
Looking forward, Target said it sees sales falling by low single digits for its 2025 fiscal year. It said earnings per share could decline as much as 21% to $7 (from $8.86 last year). Shares of the big-box retailer fell 6% today on the news.
Target is the eighth-largest retailer in the U.S., according to the National Retail Federation. And it's the fourth-largest "everything" store (selling household staples, food, and clothes), trailing only Walmart (WMT), Amazon (AMZN), and Costco Wholesale (COST).
So it's a great read on how the consumer is doing. And right now, Target's numbers are showing folks are spending less.
We've been covering cracks popping up in the consumer for months now...
Between the return of student-loan payments, the rise of buy now, pay later loans, and rising credit-card defaults, there are a lot of reasons to be worried about the consumer – and the U.S. economy.
But the market doesn't seem to care about those red flags just yet. Instead, investors have had their eyes focused elsewhere.
The AI boom has been carrying the economy...
Over the first half of 2025, investment in AI technology has been a huge contributor to the economy.
AI infrastructure spending has added around 0.5% to gross domestic product ("GDP") in the first half of 2025. Altogether, since the AI boom launched in November 2022 (with ChatGPT), data-center investment has soared more than 27%.
As Apollo Global Management Chief Economist Torsten Slok highlighted on Monday, AI investment is close to overtaking consumer spending as a contributor to GDP. Take a look...
Now, consumer spending still makes up 70% of total GDP. People spending money is the lifeblood of the country in many ways... But a slowdown has been masked in headline numbers by the flood of spending from big tech firms like Microsoft (MSFT) and Meta Platforms (META). For example, the first quarter's negative GDP growth would have been even worse without AI infrastructure investment.
For now, companies are still pledging hundreds of billions of dollars to invest in AI infrastructure. But this can't happen forever.
When the sentiment around AI inevitably starts to sour, we're willing to bet more folks will pay attention to the cracks that have been forming elsewhere in the economy. And the flood of AI money could dry up quickly.
We've recently seen a few surprising admissions from AI insiders that suggest sentiment is already changing...
In an interview released Friday, OpenAI CEO Sam Altman told reporters that folks are getting "overexcited" about AI. And yesterday, the New York Times reported that Meta is looking at downsizing its AI division.
If or when the money dries up, we won't be writing to you about a healthy garden-variety correction in stocks.
Instead, it could be a broad market-rattling period akin to the dot-com bust. And we'll hear stories about companies and people that, as Warren Buffett once put it, have been "swimming naked... when the tide goes out."
We're not there yet. But that's why we recommend being diversified in high-quality companies and owning some "hard assets" like gold, which was up 1% today. Stay the course.
On this week's Stansberry Investor Hour, Dan Ferris and I welcomed expert technical analyst J.C. Parets of TrendLabs to the show. J.C. talked through his trading approach, the "cheat code" to success, the importance of managing emotions, and more. Check it out...
Click here to watch the full interview now... Listen to the entire Stansberry Investor Hour podcast at InvestorHour.com, or wherever you get your podcasts... and to get J.C.'s free daily newsletter, Everybody's Wrong, visit JCsNewsletter.com and sign up now.
New 52-week highs (as of 8/19/25): Allegion (ALLE), AutoZone (AZO), WisdomTree Japan SmallCap Dividend Fund (DFJ), Quest Diagnostics (DGX), Western Asset Emerging Markets Debt Fund (EMD), Grand Canyon Education (LOPE), Lynas Rare Earths (LYSDY), Altria (MO), Novartis (NVS), and Ormat Technologies (ORA).
In today's mailbag, feedback on President Donald Trump and Jerome Powell… As always, send your notes to feedback@stansberryresearch.com.
"My advice to Donald Trump is to not only fire Jerome Powell, but nationalize the Federal Reserve (take it over) and put knowledgeable patriotic constitutional believing businessmen in charge of the now True Bank of America..." – Subscriber Mark M.
All the best,
Corey McLaughlin and Nick Koziol
Baltimore, Maryland
August 20, 2025