There’s been a lot going on beneath the surface of the markets lately. AI mania has slowed, the Fed is cracking the door open to cuts, and Washington just became one of Intel’s largest shareholders. Let’s break it down.
AI takes a breather, setting up a catch-up trade.
After months of breakneck hype, the AI boom is cooling. Meta and OpenAI are pacing their model launches, and an MIT study found that 95% of custom AI projects never scale. That pause dented some of the biggest winners (Nvidia, Palantir, etc. slid 5-16%). But here’s the flip side: analysts are already flagging a catch-up trade. Some of the less exciting laggards have begun to outperform and are keeping the market afloat.
Rate cuts on the horizon.
After hiring cooled in the latest jobs report and Powell’s Jackson Hole speech, markets are pricing in an 85-90% chance of a September cut. With rate cuts on deck, the “lost decade” in bonds could finally be coming to an end — a reminder that diversification still works, even if our patience has been tested.
Wall Street loved the dovish commentary.
The Dow surged nearly 850 points in a single day — the biggest rally in months — with rate-sensitive small-caps and housing stocks leading the way.
Game-changer alert: the U.S. government just took a 10% stake in Intel.
Washington is now Intel’s largest shareholder — an $8.9B stake. No board seats, just passive ownership, but it’s still pretty unprecedented outside of crisis bailouts like GM. Could we see more instances of this in the future?
The bottom line: AI leaders cool off, laggards line up for a catch-up rally, the Fed hints at cuts, bonds may finally get relief, and even the government is stepping into the AI chip game.
This post is an excerpt from a private client newsletter on 8/24/2025.