Momentum (SPMO) is back with a vengeance, but it couldn't have happened any other way, and Technology (XLK) stocks dominated the list of biggest gainers.

Not All Tech

Yesterday morning, I read a compelling piece that stated, “The Price of Intelligence Is Falling Quickly.”

The chart uses price per million tokens and the Large Language Model (LLM) Price Index; the cost of artificial intelligence (AI) has deflated as much in three years as PCs deflated in 15 years. 

This is an amazing democratization of information, and it speaks to adoption at never-before-seen levels.

Software Lower

It’s a sobering development for software (IGV) companies.

ServiceNow (NOW) was initiated on Monday morning at CLSA with an “underperform” rating, and KeyBanc (KEY) lowered its target to $85.

In addition, Morgan Stanley (MS) downgraded Salesforce (CRM) and Adobe Systems (ADBE). In 24 hours, three of the biggest pure-play software names were downgraded. They held up better than I thought, but all these names are at pivotal points on the charts.

They all appear vulnerable to moving to new 52-week lows.

This is the first time investors have doubted the future of Adobe and other software names, and while most are trying to sell themselves as AI plays or conduits of AI, it's not working. There are niches like cybersecurity that are rocking. However, most software, consulting, and data-centric businesses will have to show they still have pricing power and can thrive during the AI era.

Hyperscalers, Semis, and Earnings Season

In 2023 and 2024, hyperscalers didn’t invest enough; last year, they invested too much and used up all their free cash. Now, we are back to warnings that even the slightest dip in spending will result in a market-wide stock crash. At some point, the spending will slow, but not anytime soon.

Earnings Season Picks Up

Hyperscalers won’t be the direct “straw that stirs the drink.”

Cloud revenue could start to put to rest worries over return on investment (ROI).

Tech Steps in the Batter’s Box

After the market closes, Microsoft (MSFT) and Texas Instruments (TXN) will post quarterly financial results.

The market held up well yesterday, despite recent weakness in Technology, partly helped by select” Mag Seven” names and the rest of the market. We could see big tech and the rest rally together.

Today’s Session

It’s a tense morning, but mostly the market is in wait-and-see mode for Alphabet’s (GOOGL) results after the close.  The company is going to have to knock the cover off the ball.  I think they will, and no matter the initial reaction, the value proposition will be bolstered.

Higher crude prices are creating more hesitation for the market, but mostly we are seeing chips taken off the table with the usual buy-on-dips crowd on pause and, in some cases, tapped out.

Meanwhile, the rotation trade is holding up, but there is a difference between being a haven, or buyers looking for adjusted risk-reward ratios, and leadership.

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