The AI Tumble and the Search for Value

Fresh news and strategies for traders. SPY Trader episode #1418. This episode analyzes the morning market environment, characterized by a fundamental battle between economic resilience and valuation anxiety. While strong service sector data hints at underlying strength, an intense sector rotation is punishing AI stocks (like SMCI and Palantir) that missed expectations, while rewarding companies with proven profits (like Amgen and Snap). We discuss the 'Growth at a Reasonable Price' (GARP) philosophy driving extreme selectivity and advocate for a balanced portfolio focusing on defensive hedges (XLV), infrastructuredriven Industrials (XLI), and diversified tech exposure (QQQ) to navigate volatility.

Episode Transcript

(00:00):
Welcome back to Spy Trader .
I’m your host , Barry Bucks , and we’re jumping into the markets early today .
It's 5 am on Thursday , November 6th , 2025 , Pacific time , and we are tracking an ongoing battle between market resilience and valuation anxiety .
The US stock futures are nudging slightly positive this morning , attempting to solidify the modest rebound we saw yesterday .

(00:27):
The S&P 500 managed a 0.37% gain and the techheavy Nasdaq Composite led the charge , rising 0.65% , after suffering a sharp , AIled selloff on Tuesday .
The overarching theme right now is extreme selectivity .
Investors are rewarding proven profits and punishing weakness in highflyers .

(00:49):
Let’s dive into the key drivers .
The market is struggling with a mixed picture .
On the one hand , the economy is surprisingly robust .
Private indicators like the October ADP private employment showed a betterthanexpected rise of 42,000 jobs , and the ISM Services Index climbed to an 8month high .

(01:09):
This suggests the US economy , particularly the service sector , is resilient .
On the other hand , the political uncertainty is thick , with the recordlong US government shutdown delaying critical official economic data .
This forces the market to rely on private indicators , magnifying volatility .

(01:30):
Corporate earnings delivered a huge shakeup yesterday .
In the AI space , the rubber met the road .
Palantir fell over 7% despite beating earnings , and Super Micro Computer , or SMCI , tumbled 11.3% after a disappointing outlook .
This intensified concerns about the rapid pace of the AI rally and valuation stretches .

(01:54):
But it wasn't all bad .
Strong earnings acted as a critical counterweight .
Healthcare stock Amgen surged up to 8.8% after crushing analyst estimates , boosting the entire Health Care sector .
And late breaking news showed Snap posting a massive surge in extended trading after announcing a robust 500 million buyback and strong Q4 guidance .

(02:18):
We also saw some dipbuying confidence in Advanced Micro Devices , or AMD , which managed to rebound 2.5% .
Our analysis suggests we are in a selective rotation driven by a ‘ Growth at a Reasonable Price ’ philosophy , or GARP .
The market is distinguishing between companies that have solid earnings justifying their price and those that rely purely on forward growth hype .

(02:45):
Defensive sectors are showing relative strength .
Health Care , as evidenced by Amgen's results , is acting as a relative safe haven .
The Industrial Select Sector SPDR Fund , XLI , is up over 16.6% yeartodate , benefiting from infrastructure buildout driven by AI and a strong economy .

(03:07):
Meanwhile , Consumer Discretionary is also showing recent daily leadership , suggesting consumers are holding up despite higher mortgage rates , which recently clocked in at 6.15% .
So , what are the trades today ?
Given the volatile environment , we advocate for a balanced approach .
First , protect your core with a defensive hedge .

(03:29):
We recommend the Health Care Select Sector SPDR Fund , XLV , capitalizing on the strength shown by companies like Amgen .
For core exposure , stick with a broad market ETF like the Vanguard S&P 500 ETF , VOO , to capture the strong underlying corporate earnings trend .
Second , target fundamental resilience .

(03:51):
Buy the Industrial Select Sector SPDR Fund , XLI .
This sector is benefiting from the AI infrastructure push and general economic strength .
Third , for tech exposure , avoid chasing volatile single stocks like SMCI .
Instead , use a diversified ETF like the Invesco QQQ Trust , QQQ .

(04:14):
The Wednesday rebound , led by stocks like AMD , shows dipbuyers are active , and QQQ provides broad exposure to the concentrated growth of the Nasdaq100 without being reliant on any one company’s disappointing outlook .

Finally , a quick note on fixed income (04:30):
Given the strong economic data and sticky inflation , avoid longduration Treasury ETFs like TLT .
Instead , use a broad , core bond fund like the Vanguard Total Bond Market ETF , BND , for stability .
That’s it for this morning’s market check .

(04:51):
Stay nimble , trade smart , and I’ll catch you next time on Spy Trader .