Wall Street started Q3 by pretending the previous six months meant something. They didn't. The hunt for AI's next winners continued because the current winners looked expensive and investors needed a new reason to buy the same five stocks.
Nobody knows which company will dominate artificial intelligence. Not Morgan Stanley. Not Goldman. Not the guy at Fidelity who sent you that email about "positioning your portfolio for the AI revolution." Especially not him. But the beauty of not knowing is you can sell a lot of research reports explaining why not knowing is actually very sophisticated.
The holiday-shortened week gave traders four days to chase momentum instead of five. Productivity remained unchanged. They spent Monday through Thursday buying things that went up and selling things that went down, a strategy that would make them rich if it worked, which it doesn't, which is why they'll be back next week doing the same thing.
Technical analysis says none of this matters. The stock market moved. It will move again. Calling it a "hunt" implies intention and strategy. What actually happened is algos fought each other for four days while retail traders refreshed their brokerage apps wondering why their AI stock picks weren't up 40% yet.
Mixed results after a blockbuster first half. Translation: some stocks went up a lot so other stocks will probably go up a lot or they won't and we'll explain why that makes sense later. The third quarter just started and analysts already need a narrative. They went with AI because AI worked in Q2 and coming up with new ideas is hard.
The next winners will be determined by which companies generate actual revenue, but that's boring and takes years. Much easier to buy whatever Cathie Wood sold and sell whatever she bought.
Photo by Oren Elbaz on Unsplash
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