Stay Guarded on Wall Street
Problems are cropping up on multiple fronts -- including in AI and jobs -- so stay ready.
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Equities have gone somewhat "wobbly" here in November, especially in the tech-heavy Nasdaq. The overall market is in uncharted territory looking at the market cap-to-gross domestic product ratio. This is also known as the "Buffett Indicator" and it is far higher than even during the peak of the Internet Boom. This helps explain why Berkshire Hathaway (BRK.A) has been building up cash for many quarters now and has amassed the largest cash pile in its history.
Valuations also look beyond stretched looking at the Shiller price-to-earnings ratio, the dividend yield on the S&P 500, and the price to sales ratio on either the S&P 500 or Nasdaq. The Insider Buying/Selling ratio also points to insiders having little interest in buying this market. That said, these factors have been in place throughout most of 2025 -- including just before the big swoosh down in the market in the first half of April as "reciprocal" tariffs were announced by the administration.
But the tenor of the market feels like it is turning more negative. There are growing concerns the Fed may not cut rates again at its FOMC meeting in mid-December. The picture around the jobs market has grown considerably hazier in recent months. At best, it seems like jobs growth has been barely above flatline since June. More major corporations like Verizon (VZ) and United Parcel Service (UPS) are starting to announce significant layoffs.
The Supreme Court could also soon rule against a large chunk of the administration’s tariff policies, which would cause disarray across the economy. Bitcoin has fallen roughly a quarter from its highs of just north of $120,000 early in October. Of particular concern, given Japan’s debt-to-GDP ratio is north of 250%, its 20-Year debt yields have soared to their highest levels since the late 1990s. That development bears watching closely.
The most significant change of sentiment, however, is around the AI narrative that has driven most of the gains in the market since Chat GPT debuted some three years ago. More voices are coming forward to articulate concerns around a potential AI bubble forming, including the CEO of Alphabet (GOOGL) this week. Companies like Meta Platforms (META) and Oracle (ORCL) are issuing large chunks of debt to finance their AI infrastructure buildouts. Amazon’s (AMZN) capital expenditure budget in fiscal 2026 will be roughly three times that of fiscal 2023. This huge surge in tech spending is going to reduce the ability for these companies to do stock buybacks and could increasingly start to crimp earnings.
Even the Vendor-Financing-Circle is no longer boosting AI related stocks. Microsoft (MSFT) and Nvidia Corporation (NVDA) announced a big new deal with Antropic yesterday, in which Microsoft and Nvidia will make significant equity investments in the firm. In return, Antropic pledged to buy future services and chips from these investors. Previously, this type of announcement would have sent the stocks of Microsoft and NVIDIA much higher. Instead, they both fell nearly 3% on the day. Oracle’s stock has given up the entirety of its massive surge on Sept. 10, when it disclosed a huge deal with OpenAI.
As Bob Dylan famously wrote "The times they are a-changin." This appears to aptly describe what is going on in the markets right now. Prudent investors should be watching these unfolding events closely.
At the time of publication, Jensen was long AMZN.
