The Journal's editorial board had one piece of advice after a rough week for AI stocks. Go for a walk this weekend. Don't check your 401(k) balance. That ran on Friday, Oct. 16, after tech shares dragged the Nasdaq and the S&P 500 down. The board says it's too soon to call it a correction. It calls it a reminder.
The reminder is simple. New technology always draws a crowd of hopeful money. Some of those bets work. At some point, though, the people who put up the money ask what they got back. One line of the editorial sums it up. “Sooner or later investors will demand returns, and there will be losers.” Some big AI companies reported good earnings this week. In a few cases that steadied their own shares. It didn't steady the market. Stock prices look forward, and the big questions about AI are still open.
The scale is the issue. By common estimates, the world now puts more than $1 trillion a year into AI. The board cites a recent academic study. It found U.S. data-center giants would need revenue equal to roughly 9% of GDP a year by 2032 just to break even. A study with a near-identical figure ran in this letter on Oct. 3. Wednesday, Oct. 14 was the worst day since July for the S&P 500, down 1.1%, and for the Nasdaq, down 1.9%.
Where the money went instead
Investors didn't flee stocks. Some money went into bonds. Some went into overlooked, plain businesses like consumer goods. The Dow, with fewer tech names in it, had what the board calls “a decent week.” The real danger, in the editors' view, is debt. Much of the AI build-out is financed through private credit markets that are hard to see into. Credit can turn a change of mind about a technology into a panic. The board also welcomes signs that the Fed under Kevin Warsh means to keep money tighter. And it says AI itself has been good for the economy so far, without the feared job losses. Whether every AI company wins is a different question.
Our read
We file this under Behavioral, with Investments/Risk · IN04 behind it. The walk is good advice, and we'd add one thing to it. The mega-cap tech names in our books, Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOGL), Apple (AAPL) and the rest, are held at weight. We didn't add a share this week. We didn't sell one either. The editorial's real warning matches ours. The risk sits with the borrowers, not with the technology. That's why the names stay at weight and no more.
Your plan touches this in the 401(k) app on your phone. The app is built to be opened. It sends a push alert when the balance moves, and that alert is where bad decisions start. This week's check takes five minutes. Open the settings and look for automatic rebalancing. Many plans offer it. Turn it on if it's off. Then turn the balance notifications off. Now the plan sells a little of what ran up and buys what fell, on a schedule, without asking how you feel. You pack the umbrella in the morning, while it's dry. If you'd like a second set of eyes on the mix behind that switch, that's what a review is for.