AI Trade Stumbles as Banks Take the Lead

For the second straight day, a heavyweight tech name shattered investor confidence in the AI trade. After $Oracle(ORCL)$ ’s spending shock on Thursday, $Broadcom(AVGO)$ became the latest casualty on Friday, raising fresh questions about whether expectations for AI-linked profits have simply run too far, too fast.

AI Reality Check

Broadcom shares plunged 11% after earnings failed to clear an increasingly high bar.
Oracle fell another 4.5%, extending its post-earnings selloff.
The Information Technology sector dropped 2.9%, the worst-performing group of the day.
The Nasdaq Composite slid 1.1% Friday, ending the week down 1.6%.

$MGK

Why it matters:

Not long ago, Oracle was viewed as one of the cleanest public-market proxies for OpenAI, which committed to buy $300 billion in Oracle cloud services. That deal is now being viewed less as a guarantee, and more as a liability.

Credit-default swaps on Oracle’s debt have surged to their highest levels since 2008, signaling rising investor concern about OpenAI’s ability to meet long-term commitments.
The narrative has shifted from AI growth at any cost to balance-sheet risk and capital discipline.

Market Rotation: Banks Fill the Gap

While tech faltered, the rest of the market held up surprisingly well, signaling a clear rotation away from AI-heavy growth stocks.

Dow Jones Industrial Average gained 1% for the week (+503 points).
Top contributors: Goldman Sachs, Visa, American Express.
$Bank of America(BAC)$ hit its first record close since 2006, buoyed by:
The Fed’s recent rate cut
Expectations of lighter regulation under the Trump administration

Market Snapshot (Friday)

Dow Jones: –0.5%
S&P 500: –1.1%
Nasdaq: –1.7%
Hot Stock: $Lululemon Athletica(LULU)$ +9.6%

$LULU

Biggest Loser: $SanDisk Corp.(SNDK)$ –14.7%
Best Sector: Consumer Staples +0.9%
Worst Sector: Information Technology –2.9%

What’s Next: Data, Not the Fed, Takes Center Stage

Despite December’s Fed meeting behind us, markets won’t be catching their breath:

November Jobs Report: Tuesday
Consumer Price Index (CPI): Thursday (Both delayed by the government shutdown)

With inflation still above the Fed’s 2% target and the labor market weakening, the tension inside the FOMC remains unresolved, and markets are likely to stay sensitive to every data point.

Bottom Line

The AI trade is losing momentum, at least for now. Heavy spending, tighter scrutiny, and credit concerns are forcing a reset. Meanwhile, banks and financials are quietly reclaiming leadership, supported by policy shifts and improving fundamentals.

Rotation, not collapse, is the story heading into year-end…

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