In this article, Mike Santoli of CNBC explores the critical role of artificial intelligence (AI) in the current bull market, highlighting the need for technology stocks to recover in order for the market to advance further.
The recent selling pressure on traditionally defensive, high quality stocks has been matched by strong performance in semiconductor and AI related stocks. Walmart, Berkshire Hathaway, and Eli Lilly part of the $1 trillion market cap club but not Big Tech companies have collectively gained $550 billion in the past month, nearly offsetting Alphabet’s losses. The Nasdaq 100 and the S&P 500 Low Volatility ETF (SPLV) are closing closer to each other, a reflection of tactical rotation among investors.
Santoli notes that the AI theme is nearing a crucial moment, with little response to moderate oversold conditions or strong quarterly results from hyperscalers. This has left the S&P 500 stagnant since May, despite robust earnings growth. The Nasdaq 100 closed at its 200 day moving average, down nearly 11% from its record high. The Philadelphia Semiconductor Index ended down another 3.8%, falling under its late July low, signaling a challenging market environment.
JPMorgan’s technical strategist, Jason Hunter, advises investors to remain defensive until clear evidence of a market bottom is evident. Despite some positive sentiment on non tech stocks, the AI related segment’s weighting in the S&P 500 remains near 45%, making it crucial for the bull market to continue.
The current market dynamics are more complex, with overlapping feedback loops and scrambled correlations. AI’s role in the economy has shifted from GPU scarcity to capital constraints, making it harder for investors to find assets to capitalize on. This has raised costs broadly, with mega caps going free cash flow negative. Additionally, Treasury yields are moving in sync with AI capex sentiment, both currently in retreat.
Sentiment towards AI stocks is low, with funds positioning below neutral. Important trading lows have occurred near month turns, and the Nasdaq 100’s relative strength reading is oversold. Santoli suggests staying alert for possible relief bounces, especially if the midterm elections bring some relief.
The article concludes with a reference to a conversation on Patrick O’Shaughnessy’s Invest Like the Best podcast, featuring investor Cliff Sosin, who discusses the economic implications of AI and argues that most productivity gains will benefit consumers rather than corporations.
Santoli’s overall message is that the AI story is essential for the bull market to continue, and the market is likely to face a prolonged period of challenges before it can move forward.
Source: https://www.cnbc.com/2026/11/03/santoli-ai-bull-market-needs-tech-stocks.html