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Hello Peter Anthony Hovis,

Nasdaq Plunges 1.4% as “AI Winners” Turn to “AI Victims

The air on Wall Street grew heavy yesterday as a “violent rotation” swept through the exchange that marked one of the most bifurcated trading sessions in recent memory.

For years, the market’s narrative was a monolithic one, written in the code of megacap tech giants.

But today? That story fractured.

While the Nasdaq 100 slid 1.4% and the S&P 500 fell 0.8%, the numbers masked a deeper truth: beneath the surface of the major indices, the “average” stock was actually winning.

The catalyst for the tech retreat was a sudden chilling breeze from the AI sector. Anthropic unveiled a new automation tool that sent shockwaves through the software industry, raising existential questions for companies built on legal data and traditional enterprise services.

(Photo: Maxwell Zeff)

Shares of Thomson Reuters, Experian, and the London Stock Exchange Group plummeted as investors feared their high-margin moats were being drained by the next wave of generative intelligence.

The pain didn’t stop at the close; in late-hour trading, Advanced Micro Devices issued a disappointing forecast, which bruised the semiconductor narrative further.

Yet, as tech titans surrendered the floor, the “Old Economy” found its second wind. Walmart made history when its market capitalization crossed the $1 trillion mark. It was a rare feat for a brick-and-mortar giant, but the company has executed a successful marriage of retail dominance and AI-driven logistics.

FedEx, often viewed as the heartbeat of American commerce, extended its record-breaking rally, signaling that while investors might be wary of software “hype,” they remain bullish on physical goods and moving parts.

• “Rotation is occurring,” noted Steve Sosnick, chief strategist at Interactive Brokers. “The tricky question is whether it is a benign reallocation of exposure or a sign of some underlying instability.”

Geopolitical tensions added a sharp edge to the day’s volatility.

Sentiment soured midday following news that the US Navy had shot down an Iranian Shahed-139 drone in the Arabian Sea as it approached the USS Abraham Lincoln. The incident sent a jolt through the energy markets, lifting oil prices and providing a haven for gold, which bounced back from a recent historic rout.

Meanwhile, the digital frontier saw its own drama; Bitcoin tumbled to its lowest level since late 2024, briefly dipping toward $73,000 as the “risk-off” mood hit crypto markets particularly hard.

Even the world’s most-watched billionaire was not idle during the chaos.

Elon Musk officially confirmed the merger of SpaceX and xAI to create a $1.25 trillion titan that aims to put AI data centers into orbit. This move, while ambitious, highlights the staggering capital requirements of the new era. Oracle echoed this reality, announcing plans to raise up to $50 billion to fund its own cloud infrastructure.

(Photo: The Information)

• “The biggest concern about the AI revolution is that tech companies are spending hundreds of billions on AI infrastructure, without any guarantee that it will produce a positive ROI,” warned Tom Essaye of The Sevens Report.
  
• “I’ve often compared the current AI revolution to the rollout of electricity… Well, what if people preferred candles and didn’t buy electricity?”

As the dust settled on the session, the Russell 2000 index of smaller firms managed a 0.3% gain, standing as a testament to the day’s theme: the market is broadening out. Whether this is a temporary retreat from tech’s “hopes and dreams” or a permanent shift toward value remains to be seen, but for now, the crown is shifting from the “Magnificent Seven” to the broader ranks of the S&P 500.

• “Despite elevated volatility across the macro landscape, the underlying structure of this market is clear: We are in a ‘rotational’ bull market,” said Craig Johnson at Piper Sandler. “Capital is rotating into cyclicals and value stocks.”

Own The “Specialty Shop” of the Metals Market

Today’s Stock Pick: Kaiser Aluminum Corp. (KALU)

Kaiser Aluminum is the high-end boutique of the aluminum world.

They aren’t just cranking out raw metal; they specialize in “semi-fabricated” products. In plain English, that means they take raw aluminum and turn it into highly engineered parts (like massive plates, sheets, and tubes) that other companies then use to build finished products.

They’ve really carved out a niche in four big areas that keep the lights on.

First, they’re huge in aerospace and defense. If you’re looking at a commercial jet or a military plane, there’s a good chance some of the high-strength aluminum in the fuselage or wings came from a Kaiser plant.

Listen, there are lots of airplanes that will be manufactured over the next few years. The industry is playing catch-up after the production plummeted during the pandemic era.

The production level hasn’t recovered fully due to supply chain troubles and Boeing’s unending woes. So, Kaiser expects the production to soar to more than 2,500 in 2030.

(Source: Kaiser Aluminum)

This means plenty of business for Kaiser for years to come.

The company offers wide-ranging aluminum products for aircraft. In the graphic below, you can see how there are about 38 aluminum products required to build a single aircraft.

(Source: Kaiser Aluminum)

The aerospace industry accounts for about 33% of Kaiser’s total revenue. Packaging is the second largest segment with 36%. Kaiser offers aluminum for beverage and food cans. General engineering is another growth segment because of the trend of nearshoring.

Beyond that, they do a lot of “general engineering,” providing the metal for everything from semiconductor machinery to military armor. They’re also growing their presence in the auto industry, supplying the lightweight parts that carmakers need to make EVs go further on a single charge.

(Source: Kaiser Aluminum)

All in all, Kaiser expects FY 2025 to show a consolidated Conversion Revenue growth of flat to up 5% year-over-year, but EBITDA is projected to jump 20% to 25% year-over-year.

(Source: Kaiser Aluminum)

Regarding Trump’s tariffs, Kaiser has about 14 manufacturing locations in North America. Because it is produced in the USA, it might benefit from the government’s tariffs that prioritize products made in the USA.

(Source: Kaiser Aluminum)

What about the risk of metal prices? Kaiser passes through the cost of metal for more than 95% of shipments. Meaning? If metal prices jump, the company will simply pass along the cost to the customers. They are built into contracts and are part of the industry practice.

Now, the company has a good track record of increasing dividends.

Its dividend per share has soared by 486% since 2008. It is attractive because the company is now yielding 4.32% in dividends. That yield could rise to more than 6% if a shareholder buys the stock now and holds it for the next decade — assuming that the dividend growth maintains the previous decade’s pace.

Dividend Per Share since 2008 (Source: MacroTrends)

Bottom line: Kaiser Aluminum is a good dividend stock for those investors who are looking for a defensive stock that could benefit from the economic growth that Wall Street expects this year.

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