Stocks closed lower yesterday with most of the indexes down by -1.20% or more.

Tech-selling was a theme yesterday. But there was selling across the board.

Has anything fundamentally changed in the market over the last week? The answer is no.

After a heady runup over the last several months, there was bound to be some profit taking.

From last month's all-time high close on 1/27 (just 8 trading days ago), the S&P is down -2.58%.

I should note, however, that pullbacks (defined as a decline between -5% and -9.99%), happen on average of 3-4 times a year. Does that mean the market will go down another two and a half percent? No. Does that mean it'll only go down another two and a half percent? Also no. The point is, pullbacks are common. They happen in every bull market. And while they typically are accompanied by unnerving headlines (now the fear is about rising AI CapEx), the sky isn't necessarily falling.

That's not to discount the concern over rising AI spending. But the idea that the AI boom is over, and that they'll never see a return on that investment, in my opinion, couldn't be further from the truth. We are still in the relatively early stages of the transformational AI boom. And I believe it has years more to go. To be sure, it will enter different phases along the way. Companies like NVIDIA, for example, are selling the AI infrastructure (chips, servers, AI training systems). Others have to buy these products to build their AI models and tools. Then those tools are sold to others to build their products, or used internally to build their own products.

We are in the infrastructure phase right now and it's accelerating. The tools and models phase are in the early innings. And the application and productivity phase has really just begun. That's where the real broader economic payoff happens. But the winners will multiply as the cycle moves thru its stages.

So I would take the recent volatility in stride. And keep your eyes on the bigger AI picture.

On that note, Amazon reported earnings after the close and posted a negative EPS surprise of -1.52%, and a positive sales surprise of 0.91%. That translated to a quarterly EPS growth rate of 4.84% vs. this time last year, and a sales growth of 13.6%. They also increased Q1 revenue guidance by a half percent above the midpoint estimates. But they also projected an increase in AI CapEx of about $50 billion (or 33%) more than analysts had expected, coming in at $200B for 2026. That also happens to be about 60% more than what was allocated for 2025. The money will go towards AI infrastructure, data center expansion, and AWS compute capacity. They were off -4.42% in the regular session before earnings, and fell by more than -10% in after-hours following earnings.

But it's clear that companies like Amazon, Alphabet, and Microsoft, etc., are spending these eye-popping numbers because they see the demand for AI and believe these investments will produce high-return results.

In other news, today we'll get the Consumer Sentiment report. Always an important gauge given that roughly 70% of GDP comes from consumer spending, and a happy and confident consumer is generally one that spends.

With one more day to go, it's been a rough week for the market.

In spite of the market's reaction, Q4 earnings season has been better-than-expected so far. And we'll get more earnings next week.

Best,