Stocks End Higher After AI-Led Swings; SpaceX, OpenAI and Starbucks Shape Week

The AI trade swung violently around conflicting signals about OpenAI's revenue. The Financial Times reported that OpenAI's annualized revenue at the end of September was roughly $20 billion below what was believed to be previously indicated levels, sending AI stocks sharply lower Thursday. Broadcom, a Club holding, fell 4.4% that day, though it ended the week higher. Beaten-down stocks outside the AI trade rallied Thursday as Treasury yields eased. On Friday, the AI trade rebounded after sources told Bloomberg that OpenAI expects annualized revenue of at least $70 billion by the end of the year. The reversal underscored how quickly sentiment toward AI stocks can shift even as underlying demand for computing power remains strong. Jim said the real problem is that people think of AI as a trade rather than an investment. He said the bigger lesson is diversification. "If you had nothing but artificial intelligence stocks, [Thursday] would've been a nightmare," Jim said. A concentrated portfolio risks steep losses that can prompt investors to panic, sell and retreat to cash, potentially missing a recovery, he added; a diversified portfolio can cushion losses when a theme is hit and make it easier to stay invested.

SpaceX gave investors two developments. The Financial Times reported late Tuesday that the Elon Musk rocket and AI company is looking to raise $40 billion to buy more Nvidia chips and expand its AI compute business, which rents capacity to customers including Anthropic and Alphabet's Google. Jim said the potential debt raise would be a win for both companies because it reinforces the idea that Nvidia customers are generating strong returns on their AI investments. "Why not [do it]? Musk can immediately monetize these chips," Jim said. "SpaceX could end up being Nvidia's largest client at this pace. That's fantastic news for both sides." On Thursday evening, SpaceX announced a deal to acquire a nationwide spectrum portfolio, potentially positioning its Starlink service as a more formidable competitor to traditional U.S. wireless carriers. The spectrum would help address a key technical hurdle in Starlink's mobile ambitions and eventually allow SpaceX to combine satellite coverage with a ground-based network. The news hit telecom stocks Friday. Goldman Sachs on Tuesday raised its SpaceX price target to $230 from $220, and Barclays initiated coverage late Thursday, writing that SpaceX is "the name to own in space due to its complete dominance of each vertical it operates in." Jim still feels SpaceX is not appropriate for the Club portfolio, but said the developments suggest Musk's vision could become reality sooner than investors expected.

Starbucks drew encouraging consumer data. According to HundredX, Starbucks was the only chain among a group including Dunkin', Dutch Bros and 7 Brew to see improving customer intentions to spend more in recent months. Feedback from 29,000 customers also showed Starbucks gaining ground against competitors on taste, speed, quality and brand trust. The findings are particularly encouraging given concerns that fast-growing beverage chains such as Dutch Bros and 7 Brew could threaten Starbucks' long-term growth. They also suggest the underlying business is improving even as worries about consumer spending have pressured restaurant stocks.

In the market, the Club put more of its cash pile to work Thursday, adding to Kimberly-Clark, FedEx and Bank of New York to balance AI exposure. Elevated oil prices and interest rates continue to create uncertainty, and the approach was to selectively buy quality companies at attractive valuations rather than deploying all cash at once, according to the commentary.

Editor's Summary U.S. stocks ended last week higher despite a sharp AI-led selloff, with the S&P 500 closing above 7,800 for the first time and gaining 1.2%. SpaceX's planned $40 billion raise for Nvidia chips and its spectrum acquisition, conflicting reports on OpenAI revenue, and improving Starbucks consumer data were key drivers. The swings reinforced the case for diversification as AI sentiment shifted quickly.