Are AI Stocks in a Bubble as Shutdown Nears an End?

TL;DR

AI stocks showed signs of bubble concern after an AI-driven sell-off, while a 60–40 Senate vote created a possible path to ending the government shutdown. CoreWeave fell 22% during the prior week despite deals with OpenAI and Meta, and reopening still required final Senate passage, House approval, and President Trump’s signature. Read on for the market reaction, legislative timeline, and economic-data risks.

Transcript

Welcome to Yahoo Finance's flagship show, Morning Brief. I'm Julie Hyman. Let's get to the three things you need to know today. First up, the government shutdown could be coming to an end. The Senate voted 6040 on a procedural measure to advance a bill to end the shutdown. However, the Senate has yet to schedule a vote for final passage. The House ... Read More

Key Insights

• The government shutdown had a possible path toward resolution after the Senate voted 60–40 to advance a reopening measure. Eight moderate Democrats joined 52 Republicans, supplying the minimum support needed to overcome the Senate's filibuster rules.
• The proposed legislation would reopen the federal government through January 30 while funding certain programs for a full year. SNAP benefits and the Agriculture Department were among the areas receiving full-year funding, alongside some restrictions on President Trump's ability to fire federal workers.
• The shutdown could not end immediately because the Senate still needed final passage, the House needed to approve the measure, and President Trump needed to sign it. Senate procedural rules also allowed individual senators to delay the process for several days.
• The economic data disruption could persist after reopening because federal employees would need time to return and process information. September employment data had already been collected and could appear relatively quickly, but the status of October employment and inflation reports remained unclear.
• The scheduled inflation report was not expected to arrive because government workers had been unable to monitor prices during the shutdown. The White House indicated that the affected release might not merely be delayed, but could be unavailable entirely.
• The market rebound was led by technology shares after the Nasdaq experienced its worst weekly decline since April. Nasdaq futures indicated a gain of about 1.5%, compared with approximately 1% for S&P 500 futures and 0.4% for Dow futures.
• The AI rally was producing both bullish forecasts and bubble concerns. UBS expected AI technology, resilient sector performance, and corporate earnings to help the S&P 500 reach 7,500 by the end of 2026, while the program highlighted concern about an AI bubble.
• Disney's quarterly outlook combined weakness and resilience across its businesses. Adjusted earnings were expected to decline, revenue growth was projected near 1%, parks revenue was expected to rise about 7%, and Disney Plus subscribers were forecast to total 130 million.

Questions & Answers

Q: Are AI stocks in a bubble as the government shutdown nears an end?

The program raised concern that the AI-driven market rally could be a bubble, but it did not establish a valuation threshold or conclude that one existed. CoreWeave fell 22% during the prior week’s AI-driven sell-off despite agreements with OpenAI and Meta and expectations for strong results.

Q: How could the government shutdown come to an end?

The Senate voted 60–40 to advance legislation that could reopen the federal government, with eight moderate Democrats joining 52 Republicans. The measure still required final Senate passage, House approval, and President Trump’s signature.

Q: What does the proposed shutdown agreement include?

The proposal would reopen the government through January 30 and fund selected programs, including SNAP benefits and the Agriculture Department, for a full year. It also included some limits on President Trump’s ability to fire federal workers and a promise of a healthcare vote in December.

Q: When could the federal government reopen?

The transcript did not provide a definite reopening date because Senate rules could delay the final vote. House Speaker Mike Johnson planned to give members about two days to return to Washington, creating an estimated Wednesday timeline for House consideration, although that remained uncertain.

Q: Why did stock futures rise after the Senate vote?

The Senate vote created a clearer path toward reopening and sparked a risk-on mood in markets. Nasdaq futures pointed to a gain of about 1.5%, S&P 500 futures to about 1%, and Dow futures to about 0.4%.

Q: Why might the next inflation report never be released?

Government workers had been unable to monitor prices in real time during the shutdown, so the required inflation data was not collected. The White House indicated that the scheduled Thursday release might be unavailable entirely rather than merely delayed.

Q: Which jobs reports could become available after reopening?

September jobs data could be released relatively quickly because it had been gathered before the shutdown began and was waiting to be compiled. The fate of October jobs data remained unclear because federal operations and data processing had been interrupted.

Q: What earnings reports were investors watching?

Disney was expected to report its first quarterly adjusted earnings decline in more than two years, with sales growing at less than one-fifth of the pace recorded a year earlier. CoreWeave’s results were expected to be strong after it reached agreements with OpenAI and Meta, although its stock had fallen 22% the previous week.

Summary & Key Takeaways

• The Senate voted 60–40 to advance legislation that could reopen the government, with eight moderate Democrats joining 52 Republicans. The proposal would fund the government through January 30, provide full-year funding for selected programs, and impose some limits on the president's ability to dismiss federal workers.

• Markets responded positively to the possibility of reopening, although investors had largely shrugged off the shutdown while it continued. Nasdaq futures rose about 1.5%, S&P 500 futures gained roughly 1%, and Dow futures advanced about 0.4%, with technology and AI-related shares helping lead the rebound.

• Investors remained focused on earnings and the sustainability of the AI-led market rally. CoreWeave was expected to report strong results after agreements with OpenAI and Meta, despite losing 22% during the previous week's AI-driven sell-off. Disney faced expectations for lower adjusted profit and slower revenue growth.