On the heels of the big upside rally on Friday, sparked by Fed Chairman Jerome Powell's acquiescence to rate cut pressure, stocks took an alternate route to reality on Monday, shedding more than 300 points on the Dow, the S&P slip-sliding away, and the NASDAQ, which notably did not mark a new record high on Friday, pumping and dumping all in one strange session. Down more than 90 points just after the open, the index was up 75 by midday, only to lose is all and finish 47 points in the red.
Stock trades on the NAZ were probably made with assistance from AI, which has shown itself to be vastly overrated and magnificently overpriced in terms of what big tech firms have been spending on implementing newer, better, faster iteration of chatboxes. The Large Language Models (LLMs) that the likes of Google, Microsoft, Apple, X.com, and others have been developing have come with enormous up-front costs in material, learning, coding, and implementation, and the ongoing costs of maintaining the hardware for these massive server farms figure to be extreme, to the point of negative marks on company balance sheets.
While getting answers quicker than a Big Mac at a drive-through may be a marvel of technology, in basis terms, it costs a ton of money to find out who had the highest batting average in the National League in 2004 or what's the best way to make pizza at home. It used to be a matter of just cruising the internet until one found a site with the information, but, in their infinite knowledge and commitment to not being evil (looking at Google here), big tech decided to glom up all the traffic on the internet and keep it on Google or Bing or wherever the AI beast has been positioned, taking the best from the websites that produced the information in the first place and paying them nothing for it.
Webmasters and site owners around the world are very upset at this development, especially those which relied on traffic from the search engines for revenue, via ad programs such as Google AdSense, which the AI option has canabalized. Thus, Google gets more traffic and hits on their self-generative ads, websites get nothing for providing the information, and, ultimately Google just plain eats itself. So far, AI has done little other than stifle innovation on the internet and made more than a few humans a little bit dumber, as if that was a prerequisite goal of AI, which, it must be constantly remembered, stands for Artificial Intelligence.
Yes, there have been real profits and stock price jumps, but the piper is playing and he likes to get paid. It's beginning to look like the only real thing about AI was the hype, as in, it was really, really hyped to the max!
With stocks in the tech space rivaling valuations from the dotcom era, there's a high degree of risk in owning these names presently. Sure, in 1999-2000 the internet was the thing and all companies needed to do to launch an IPO was attach .com to their name and come up with some funny ad campaigns and $100-500 million would come into their coffers. The AI craze is a little bit different, because the internet is still there, it's more robust, and AI is just another app, or SaaS (Software as a Service) to be monetized by the tech titans.
Could be an "oopsie!" moment waiting to happen.
It's worth pointing out that the Dow Industrials made an all-time closing high on Friday, but the Transportation Average, which, according to Dow Theory, needs to confirm, is nowhere near record levels. For purists, the primary trend remains bearish.
While Monday's trading indicates that Friday's rally was built entirely on hype and hope, Tuesday's set-up is not encouraging for the bull camp. President Trump intensified efforts to oust Federal Reserve Governor Lisa Cook, fanning the flames of the ongoing rift between the Fed and the White House. Inflation concerns are sending bond yields higher as tariff issues intensify.
The Commerce Department reported orders for durable goods fell 2.8% after declining 9.4% in June. Around the world, stock indices are lower everywhere from Tokyo to New Delhi to Berlin and London. France is being ravaged, with the CAC-40 off more than 1.25%.
Stock futures in the U.S. are dropping a half hour before the open.
Gold and silver are bid, WTI crude oil is lower. Bitcoin continues to be sold off, dropping below $109,000 earlier Tuesday morning.
From the looks of things, if Friday's rally was a last hurrah for stocks in a buy the rumor, sell the news kind of way, the remainder of this week could become very interesting.
At the Close, Monday, August 25, 2025
Dow: 45,282.47, -349.27 (-0.77%)
NASDAQ: 21,449.29, -47.24 (-0.22%)
S&P 500: 6,439.32, -27.59 (-0.43%)
NYSE Composite: 21,000.56, -149.55 (-0.71%)
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