Bad news travels fast. Good news barely travels at all.
Take Alphabet (Google). The search giant reported disappointing advertising and search revenues on Wednesday, October 28. Google is a major artificial intelligence (AI) player with its Gemini product, but traders worried AI was eating into its core search business and hit the Sell button. The stock fell 12.6% on Thursday, wiping out about $500 billion in market value.
Alphabet wasn’t the only tech giant to stumble in October. Meta (Facebook) fell 15.2% due to concerns about the sustainability of its AI spending. Together, the two make up around 45% of Communication Services ETF’s (VOX) portfolio, dragging the ETF down 10.1% on the month. Intel fell 28.6% on Friday after reporting disappointing results.
Are these stumbles a sign the AI rally is running out of steam? Maybe. Maybe not. Microsoft bucked the trend, growing while keeping spending in check. We’ll only know the full picture in hindsight.
But as I’ve been saying all year, you don’t have to hitch your portfolio to AI stocks—and you shouldn’t.