Episode 177: From Tailwind To Headwind: How AI Shook Stocks

Markets don’t fear innovation; they fear paying too much for it without proof. We dig into why stocks whipsawed to start 2026, how a string of data points moved sentiment, and where the AI narrative flipped from easy tailwind to hard questions about ROI, competition, and disruption risk. From softer retail sales to steadier jobs, from chip margin pressure to mortgage rates slipping below six percent in some regions, Greg connects the dots between headlines and the tape so you can separate noise from signal.

We walk through the mechanics of the AI repricing: giant CapEx plans that once guaranteed multiple expansion, growing scrutiny of payback periods, and the outsized role of a few buyers in fueling order books. Then we get practical about competitive dynamics after Gemini’s strong benchmarks and the push toward proprietary silicon, exploring what that could mean for demand at chip suppliers, cloud platforms, and software vendors. The conversation doesn’t stop at tech. We trace cannibalization fears into brokers, transports, and professional services, outlining where automation may compress revenue models and where it can unlock real productivity gains that stick.

Most importantly, we map the signposts that could steady markets: clean disclosures that tie AI investment to recurring revenue, utilization and margin trends that improve quarter to quarter, and proof that new tools enhance—rather than erode—core profit pools. Along the way, Greg shares a pragmatic playbook: keep quality exposure to AI infrastructure and platforms, size for execution risk, favor diversified cash generators with pricing power, and look for software that charges on outcomes, not seats. Want a clearer lens on volatility and a checklist for what to watch next? Tune in, subscribe, and tell us where you see the most durable AI earnings power this year.

Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC.

The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may suit you, consult the appropriate qualified professional before deciding.  

Transcript

Welcome And Show Setup

SPEAKER_00 0:01

Welcome to Money Matters with Greg, where we dive into the money conversations shaping your life. From investments to estate planning, insurance to taxes, we cover it all with a fresh perspective. Join Greg and his guests each week to get inspired and take control of your financial future. Let's get started. Securities and investment advisory services offered through LPL Financial Registered Investment Advisor, member FedRES IPCF.

Market Recap For January–February

Weekly Data And Fed Sentiment Swings

Tech Selloffs And Earnings Pressure

Rates, Commodities, And Housing Moves

Framing The AI Narrative Shift

Spending Euphoria To ROI Scrutiny

OpenAI Commitments And Concentration Risk

SPEAKER_01 0:43

Hey, good afternoon. It is Greg Farrell, CEO and owner of Ferrell Wealth, and the show is Money Manager Greg. We talk about money on the show. It's been a bit, it's been a hot minute since I've uh produced the uh new podcast. Uh, wanted to talk about what's going on, been going on in the market as far as February goes, uh, the new year, 2026, and just a number of different things that's been crazy uh as far as the movement uh in the markets. They had a really solid January, and then everything kind of retraced. And then uh ultimately here in February is pretty much flatlined. A lot of a lot of earnings have been coming out. And uh, just wanted to talk about some things. Uh again, we broadcast on WVLP 103.1 FM. Uh thanks for having us and uh listening to us here at 103. 103.1 FM in WVLP and Valparaiso, Indiana locally, and then also podcasting uh anywhere you can find your pods uh wherever you pod, uh you can find us uh as well. I think we're on now 178 as far as episodes, uh 178 episodes, and kind of talk about uh some things just because uh the markets have been just uh volatile, and I just wanted to update everybody as far as the market recap. Uh we talk money on this show. Uh we try to help you out with this, uh, your lives, as far as you know, adding value to your lives and adding some money tips, uh, some ideas so you can help save some money, and then also obviously your investments. Uh, talk about the SP and overall asset classes that you can ultimately be involved in. And uh that's that's ultimately what we're gonna talk about today. Uh the show is broadcast live uh on Thursdays at one o'clock, and then also replayed as well on uh Saturdays at one o'clock on WVLP103.1. But then also, as I said, anywhere you're pod, uh be happy to uh uh check it out. And if you want to contact me in any way at Greg at FeralWealth.com uh is my email. Please feel free to reach out at any time. All right, so a little market recap. Uh like I mentioned, uh January was volatile. Um sorry, I've been a little bit um out of pocket in regards to the podcast. We've been very busy with Indiana University winning a national championship. Um been traveling all over uh trying to enjoy uh the festivities that has been uh uh natty because this is all new to us and we've been having a lot of fun with it. Um but uh we're back at it here and ready to roll and try to help you out uh throughout 2026. I wanted to talk about uh see a little bit of volatility. Uh you've seen uh a massive volatility really in the first uh month. Uh stocks have remained volatile just last week amid a number of signals uh that the um economic data, latest economic data, and then also uh AI disruption uh that has really sort of spread this angst uh to uh non-tech sectors as well. The SP fell uh 1.35% for the week and is completely flat year to date. So um up in January uh and then uh down here in February, but equity markets last began last week with uh uh really flat open Mondays. Traders sort of weighed what was going on in Japan with the LDP party, uh their landslide uh and their big political victory that uh really bolstered stimulus expectations in Japan. Uh, we'll be watching that and we'll be uh reporting on that as well as what we see in regards to Japan. But uh stocks did begin to get a lift uh last week, really after the Feds uh New York Fed's survey of uh consumer expectations revealed a significant and favorable drop in inflation expectations, sparking a you know risk on money flow for sure. The SP 500 added 0.47 uh that that day. Um, and uh that was really solid. And then kind of going into the other things that like that was Monday, Tuesday of last week that delayed the uh December retail sales report came in weaker than expected, and that was really sort of adding this dovish flow into bonds. So it immediately flipped from risk on to risk off. Um, and then this AI disruption concerns prompted a wave of rotational money that just kind of moved out of the old economy stocks. Um, you know, sort of we saw then kind of outperform uh many of the big tech tech names that traded lower. Uh, and that's dragged the SP down 0.33. So uh back to pretty much being, you know, even for the week. Wednesday uh contained a big economic release of uh of the week via the uh December jobs report. Uh it was better than expected, which is great, and reinforced the uh current kind of Goldilocks economy, uh, although it failed to really spur any rally in the SD 500. Uh finished the day basically little changed. And then Thursday, volatility picked up in earnest on Thursday with the sell-off and big tech names again, uh intensifying that uh back to the soft margin guidance of uh legacy tech that Cisco's uh with management citing surging chip prices as critical negative influence and uh really on their overall look. Um that corporate news paired with the JavaScript and existing home sales reports, both missing estimates weighing heavily on the market and the SP ended near lows down 1.57%. Um, stocks fell to their lows the week shortly after that on Friday, despite the uh solid earnings from semiconductor uh manufacturer AMAT and a favorable January dip in the headline and the core CPI figures released ahead of uh the open and were marginal at best. So the market was quick to release kind of steady as uh dip buyers stepped in to defend that 6,800 level in the SP 500. Uh, but that bid was uh certainly tentative and the rally really lost momentum in the afternoon, leaving the index to close just up 0.05. So um, you know, a negative week uh last week, again, a negative feeling and a negative uh uh uh sense uh for the month of January or month of February. Um, and now that we're you know basically gone two months here uh into the year and we are unchanged as well. We have uh numbered weather issues uh nationwide that are going to affect um travel. Uh certainly these these storms coming into California uh with all the feet of snow that are happening and the rains as well. We'll see how that affects uh the economic numbers coming up here into the next year, the next week or so. But that's kind of an update from February. Um uh it's now February 17th, and uh we'll be broadcasting this show in WBLP here on Thursday, uh February 19th at one o'clock. Uh just sort of the update from the last week and where things are. The SP 500 uh is right around the level of 6,800. Uh the US dollar is trading 97.12 uh at this moment. Gold uh is in around 5,000. Um and crude is around uh$62.5 a barrel. There's been some issues, obviously, with uh geopolitical issues in uh Iran uh that have uh rallied rallied oil as well. The 10-year yields right around 4.02. So uh you're also seeing some mortgage rates come in that have been new to the the world of the markets, uh, as well as uh some excited realtors out there. I know uh in Florida alone, uh, and just talking to a couple people down there just uh today uh that uh people are seeing below six on uh on mortgage rates. So that's interesting to see um where that might take us as well as far as rates and where a rate cut. There is a uh a higher probability of a rate cut in June, but not until then. Um so we'll see how that looks. Um here we'll be filling everybody out on that, keeping everybody abreast as well, um in regards to uh mortgage rates in the future. All right, the most shows money matters with Greg, and Greg Farrell, CEO and owner of Ferrell Wealth, it's a wealth management firm locally uh locally based in Valparaiso, Indiana, but also serving clients in 24 states nationwide, uh, managing money for clients and high net worth individuals and families, and also uh a number of different business business owners in 401k's uh you know retirement plans, you name it, uh, and helping out uh many different uh types of uh people throughout the nation uh in regards to their money. And we're happy to help you today uh try to add some value and kind of update you in the markets, and then also I want to go into uh the tech world uh of exactly uh kind of what has happened with the AI conversations. It's been up and down, it's been uh a ton of different information, it's moving extremely fast. And I wanted to make sure you knew kind of what's been going on uh with tech here in 2026. And you know, AI for the last three years has really been a uh uh tailwind uh to the market. It's really been behind a number of different companies doing extremely well and pushing to forward towards great earnings, uh high investments and multi-billion dollars and even trillions of dollars of reported investment that uh seems to be intentional and seems to be uh certainly the future. And many of these earnings reports from most of the companies that are investing in AI have big numbers uh to that they plan to invest. Now, really the biggest event of 2026 so far has been the fact that the AR AI market-related news has really transitioned from being this consistent positive for stocks uh to suddenly becoming uh a headwind, uh, where it was a tailwind before is for sure a headwind. And as concerns on the sort of the return on investment of AI and spending by major tech firms, and basically the potential AI disruption of various sectors has really kind of pressured stocks, not only last week, but uh really since November of 2025. And given the focus on AI and recent market volatility that's been crazy, I just wanted to take some time to kind of tell a story of what's happening with AI in plain English. Um, because I know investors uh, you know, want to talk about what's going on and what's going to happen. And certainly we we follow it. Um, want to explain it the best I can explain it in a simple way. And I really believe the story will help you uh first off by explaining why tech is weak, um, and then why the market uh is volatile uh for sure, and then also what's next for AI, and in doing so, kind of impress um uh just some ideas that uh might help you along the way is to kind of follow the story and um where to invest and how to how to invest in this wild ride that is AI that's constantly moving. But before we really explain what's changed, I really want to establish like an important context here. For the past three years, like I mentioned uh before, uh even since the AI bull market started, investors have really imbued AI as a universally positive for stocks. And it's been very, very good. Specifically, that AI was going to one, boost productivity, um, and two, increase corporate profits and really be a positive for corporate earnings overall. And that's really why the sort of simple mention of AI at times, uh, with a build-out integration, and yes, we're using AI, uh, we're positive catalysts for virtually any stock uh in the market since 2023. Everyone was coming out with their new AI uh widget and um gadget. And uh we're using AI for this and that, and of course, uh stock would would be reflected as so and usually move to the upside. But really, in addition to that, the investors had the view that no amount of money spent on AI was too much, um, because it was just all viewed as money that will grow and earnings and it'll show up in the earnings column, which of course we look at uh all the time. And it's very important that we have an earnings number that we need to uh that we are satisfied to be able to invest in in individual companies. But the more a company uh spent and on the build out of AI, the more they would grow uh was the idea, and the faster the stock would appreciate. And the peak of this really just kind of came in September of last year. So let's go back to 2025. And this was highlighted by the huge 30% daily rally in Oracle after it revealed uh just massive backlogging orders. And you know, however, like things kind of softened in in this October, and immediately following those Oracle results, sentiment, sentiment uh for AI just sort of began to change. And before it was uh no amount of money uh is is enough and um earnings will be fine. But then wow, are you sure you're gonna put a hundred billion dollars into uh this thing? Even uh a number of companies that said they'd invest as much as open AI said he would be able to invest up to a trillion dollars. Um so investors kind of began to question exactly how this is all going to work. And with OpenAI, it doesn't really what if OpenAI doesn't really spend all the money, is my first problem that we want to talk about. So on further review on the Oracle news, um the Oracle backlog was almost totally attributed to one company in the OpenAI. And OpenAI, which was created by ChatGPT, had uh committed to spending a trillion dollars uh with various AI infrastructure tech companies in Oracle, Nvidia, um ABGO, uh Microsoft, um and uh many others. And expectations of these payments and these massive earnings growth would provide you know fees to fueling huge rallies in the major tech stocks, which coincidentally powered the markets higher for most of the last of the three years. Now, that meant part of this tech-driven bull market was almost entirely um uh attributable to the commitments uh of just one company. So what would happen if AI couldn't obtain financing to make those payments in the future? Or what would happen if another competitor began to take market share and hurt Chat GPT? Um, in that case, the gains in many tech stocks would be premature for sure, and those stocks would see multiple contracts um as expected earnings growth that just would never materialize. So it was a it's a bet uh uh for sure. But what if they don't spend the money that they say they're going to? Um the next blemish that we're seeing uh that I want to be able to mention is Gemini. You know, in November, parts of those fears really kind of all these fears about spending were kind of realized in Alphabet, realized uh Google. Um they released an update and it's uh uh AI named Gemini. But the update was so good that based on many test texting metrics, Gemini now outperforms Chat GPT. And this was an initial catalyst that kind of shook the positive AI mantra and kind of here's why. First, Gemini takes market share from ChatGPT, and then open AI may not have the money to fulfill the$1 trillion in obligations made to uh many major tech companies. That means lower multiples and declines for the AI hyperscalers or infrastructure names like Microsoft, Nvidia, Oracle, um, and we've seen it in the software stocks too get hit. Um what happens if Gemini outperforms Chat GPT? And then second, Gemini is being built on Google's proprietary semiconductor. So this is a big deal because the reason that NVIDIA, VRCom, Taiwan Semi, and others have exploded in recent years is because of the just the demand for the semiconductor chips. And as they are necessary to build uh and build out all these LLMs that are necessary for infrastructure. And Google making their own chips implies the demand for chips from Nvidia and Taiwan semiconductor may be less than expected. So that means less earnings growth, lower multiple for semiconductor stocks. And then finally, if Google can take Gemini and make it as good as ChatGPT on its own chips, then others are likely to follow as well. And the fear is that AI becomes demonetized, um, making trillions of dollars in AI infrastructure investment just foolish. Um so basically, Jim and I kind of broke the idea that all the money spent on AI was good and that money would result in earnings growth immediately. Uh, it's really sort of in as in essence ushered in sort of a scrutiny on the AI CapEx spending and and altered the paradigm of AI tech stocks exist currently exist in. So practically that means that it's no longer the case that a company that spends the most on AI infrastructure wins, and we can see that the market reaction and the collapse uh really in this mega cap uh free cash flow uh that has affected uh you know overall investment in recent in recent weeks. So here we are at Money Matters with Greg. I'm Greg Farrell, CEO and um uh owner of Ferrell Wealth. It's a wealth management firm locally here in Valparaiso, Indiana, and then also helping clients nationwide. We're talking about the AI infrastructure right now and what's going on uh in the overall markets, uh, and just sort of updating everybody on some of the fears that are going on. And I've gone through the first two uh here on the show. Uh again, we're broadcasting on WVLP 103.1 FM Thursdays at one o'clock, and then repeated on Saturdays at one o'clock uh locally. You can also find them on TuneIn Radio if you want to listen to the radio, but you can also find us anywhere we pod as well, Apple, Spotify, you name it. So I've gone through the first two things uh that uh worried about uh open uh AI being able to spend this money, and then what if Google competes with open AI and then starts uh beating them out uh in regards to quality uh on their own chips. But the last thing I want to talk about, the third problem is this concern about cannibalization. And this is really the concern that has emerged more recently as AI advancements have uh created worries that AI will disrupt not just white-collar office uh jobs, but also the entire industries that are really integral into the markets. And the fear is that why uh that fear is why Claude Cowork and Claude Legal crushed software stocks two weeks ago. And why the brokers um uh were hit so hard last week. So that fear is why Claude Cowork and Claude Legal crush these software stocks recently and two weeks ago, and this is why the brokers and transports just sort of they were hit as hard as well. And these fears that are erupting that AI will disrupt the entire industry and overall industries. And that those AI anxieties and those fears really spent spread beyond tech and are negatively impacting the rotation trade that's really supported stocks since October. Uh, where no sectors say from fears of AI could disrupt it. Because again, before it was talk about AI and you're doing great, then your stock will be reflected as such. Now, if you're investing in AI, everyone wants to know about the return on investment and are you spending money wisely? So here's an overreaching point we kind of need to understand in this entire thing. The bull market of the past three years really is driven by two factors. One, increased earnings expectations as tech stocks and tech companies massively grew profits in this surging AI demand. And that hasn't stopped. It's still there. So, you know, if you're still talking about um growth for sure. But um it's something to watch, and that's what's been driven driving everything the last three years. And this multiple expansion as investors really this uh this idea of uh investors viewed AI as a productivity boosting machine for all industries, uh, leading investors to really kind of pencil in the future earnings of growth. And when you Gemini, cannibalization, over resilience on open AI, and other recent AI headlines are really eroding all of these beliefs in multiple different ways. And for this to stop, we really need proof, proof element to kind of appear and show AI CapEx is generating this positive ROI, and then AI will not destroy all entrenched uh industries. Uh recently um Elon Musk came out uh with a post on X uh about how the trades are safe for multiple years. Uh, but many of the things that have to do with uh anything to do with the screen and output from the screen uh are going to be challenged by AI and professions as such. So you look at a career um of going into just you know just recently uh uh becoming an expert in coding and be an expert coder, and uh, you know, how's that looking now? Um and so trying to find these industries that uh will be enhanced um versus taking over is really kind of what uh we're all trying to figure out uh right now and hopefully not destroy in transit industries, but actually just encourage and add more productivity and make them more efficient, more productive, and boost earnings, of course, uh is the key. So until we get that really that catalyst or that uh uh that growth element, um we can expect sort of this mixed sentiment and elevated volatility uh for the next few weeks, uh if not the rest of the year, to see where these things all kind of come about. But I wanted to make sure you guys all uh were aware of this, and this is why I bring it up uh here. The show's Money Matters with Greg. I'm Greg Farrell, CEO and president of Faro Wealth. It's a wealth management firm helping clients all throughout the nation with their investments um and their estate planning conversations as far as financial planning and their lives in regards to their dollars and cents. So that's why we talk about the show on the show. Uh, we talked money on the show, and hopefully we're able to help you out today with some ideas on not only what the market's been doing in the last week or so, but then also um what we're seeing in regards to the AI world as well. Um again, thanks for listening on the WVOP 103.1 FM, um, and then also anywhere you pod. It shows Money Matters or Greg, and we're just thankful to have you with us. Uh, you can find us on YouTube, on our YouTube channel, and then if you got any topics you want to talk about, please just email me, Greg at farrowwealth.com. Um, and uh with any questions or concerns, and I'd be happy to try to address them uh and talk about them in future uh episodes as well. Uh thanks for again for being here, and uh we'll catch you on the next one. See ya.

SPEAKER_00 26:29

Thanks for tuning into Money Matters with Greg. We hope you gained some valuable insights today. Remember, your financial journey is personal, but you don't have to go it alone. If you enjoyed the show, be sure to subscribe and share. Until next time. Here's the making your money work for you. Securities and investment advisory services offered through LPL Financial, a registered investment advisor, member FINRA SIPC.