US equities kicked off the final trading week of 2025 with a bit of a whimper, despite holding close to record highs. The truncated trading week will face a hiccup with a holiday closure on the cards later in the week, and the only meaningful point of interest on the data docket is the latest Federal Reserve (Fed) Meeting Minutes, slated for release on Tuesday.
Major indexes are struggling to find the gas pedal amid rock-bottom year-end volumes. The Standard and Poor’s 500 (SP500) index touched record intraday highs during the overnight session before cooling back to flat for the day, driven lower by another softening in the AI tech rally space and declines in the home building materials segment. The Dow Jones also reached higher during the overnight session before backsliding to near-flat from last Friday’s close, with upward momentum sapped by a 1.7% decline in Nvidia (NVDA) shares.
Equities remain bolstered despite year-end slowdown
With the year-end Santa Claus rally keeping bids buoyed, the Dow Jones is on pace to close either bullish or at least flat for the eighth straight month, rounding the corner into the new year. Despite year-end volumes drying up, equities remain buried deep in bull country for the year. The Dow Jones is up over 14% year-to-date, with the SP500 testing a 17.5% gain from January’s opening bids.
Fed minutes in the barrel for Wednesday
The Fed will release its latest Meeting Minutes on Tuesday, and investors will be looking for signs of a dovish tilt in policymakers’ internal decision-making rhetoric. Fed officials hit a cautious tone with the latest dot plot update of interest rate expectations, with Federal Open Market Committee (FOMC) voting members expecting a total of two quarter-point interest rate cuts over the next two years. Rate market speculators are expecting the Fed to get bullied into more interest rate cuts, with rate traders pricing in two rate trims by September of 2026.
Dow Jones daily chart
AI stocks FAQs
First and foremost, artificial intelligence is an academic discipline that seeks to recreate the cognitive functions, logical understanding, perceptions and pattern recognition of humans in machines. Often abbreviated as AI, artificial intelligence has a number of sub-fields including artificial neural networks, machine learning or predictive analytics, symbolic reasoning, deep learning, natural language processing, speech recognition, image recognition and expert systems. The end goal of the entire field is the creation of artificial general intelligence or AGI. This means producing a machine that can solve arbitrary problems that it has not been trained to solve.
There are a number of different use cases for artificial intelligence. The most well-known of them are generative AI platforms that use training on large language models (LLMs) to answer text-based queries. These include ChatGPT and Google’s Bard platform. Midjourney is a program that generates original images based on user-created text. Other forms of AI utilize probabilistic techniques to determine a quality or perception of an entity, like Upstart’s lending platform, which uses an AI-enhanced credit rating system to determine credit worthiness of applicants by scouring the internet for data related to their career, wealth profile and relationships. Other types of AI use large databases from scientific studies to generate new ideas for possible pharmaceuticals to be tested in laboratories. YouTube, Spotify, Facebook and other content aggregators use AI applications to suggest personalized content to users by collecting and organizing data on their viewing habits.
Nvidia (NVDA) is a semiconductor company that builds both the AI-focused computer chips and some of the platforms that AI engineers use to build their applications. Many proponents view Nvidia as the pick-and-shovel play for the AI revolution since it builds the tools needed to carry out further applications of artificial intelligence. Palantir Technologies (PLTR) is a “big data” analytics company. It has large contracts with the US intelligence community, which uses its Gotham platform to sift through data and determine intelligence leads and inform on pattern recognition. Its Foundry product is used by major corporations to track employee and customer data for use in predictive analytics and discovering anomalies. Microsoft (MSFT) has a large stake in ChatGPT creator OpenAI, the latter of which has not gone public. Microsoft has integrated OpenAI’s technology with its Bing search engine.
Following the introduction of ChatGPT to the general public in late 2022, many stocks associated with AI began to rally. Nvidia for instance advanced well over 200% in the six months following the release. Immediately, pundits on Wall Street began to wonder whether the market was being consumed by another tech bubble. Famous investor Stanley Druckenmiller, who has held major investments in both Palantir and Nvidia, said that bubbles never last just six months. He said that if the excitement over AI did become a bubble, then the extreme valuations would last at least two and a half years or long like the DotCom bubble in the late 1990s. At the midpoint of 2023, the best guess is that the market is not in a bubble, at least for now. Yes, Nvidia traded at 27 times forward sales at that time, but analysts were predicting extremely high revenue growth for years to come. At the height of the DotCom bubble, the NASDAQ 100 traded for 60 times earnings, but in mid-2023 the index traded at 25 times earnings.
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