AI Stocks Weigh on Wall Street as Fed Cautions on Risks

A Cautious Fed Puts Investors on Edge

The Fed may have cut rates last week, but Jerome Powell isn’t letting markets run away with optimism.

In a speech at the Greater Providence Chamber of Commerce, Powell stressed that risks remain “on both sides” of the central bank’s dual mandate.

Translation: inflationary pressures - amplified by higher Trump-era tariffs - are still very real, even as the job market shows signs of cooling.

That leaves rate cuts later this year uncertain, and investors were quick to adjust expectations. The latest PCE inflation print, due Friday, will be the next big test.

Nasdaq Stumbles Under AI Pressure

Tech stocks, which have led markets for months, finally hit resistance.

Nvidia (NVDA | –2.82%), after announcing an eye-watering $100 billion investment in OpenAI, faced investor skepticism that it might be “buying its own future revenues.”

Meanwhile, the hyperscalers, Amazon (AMZN | –3.04%), Microsoft (MSFT | –1.01%), Meta Platforms (META | –1.28%), and Alphabet (GOOGL | –0.21%) all took a hit.

It’s a reminder that even the AI darlings aren’t immune to pullbacks, especially when valuations are sky-high and investors start wondering if the growth story is running ahead of itself.

Private Equity Bets Big on Natural Gas

The AI revolution isn’t just about chips and data centers, it’s about power. Lots of it.

Enter KKR (KKR | +0.2%) and Blackstone (BX | –0.39%), who together are putting $17 billion into natural gas infrastructure.

KKR and CPPIB acquired a 45% stake in Sempra Infrastructure Partners (SRE | +4.47%), eliminating the need for Sempra’s previously planned capital raise.

Blackstone is leading a $7 billion investment in Sempra’s Port Arthur LNG expansion in Texas, giving it nearly 50% control.

This is a clear signal: AI’s insatiable energy demand is reviving traditional energy plays, particularly natural gas, as data centers require steady baseload power.

Other Market Movers

Micron Technology (MU | +1.09%) briefly spiked on strong growth figures but quickly pared back gains. Even so, shares are up nearly 100% year-to-date.

Firefly Aerospace (FLY | –15,31%) disappointed with its first quarterly resultssince going public, missing revenue expectations.

Plug Power (PLUG | –4.53%, –4.74% after hours) couldn’t hold onto Monday’s 22% surge, sliding again as volatility grips the hydrogen sector.

Macro & Commodities

• The OECD nudged its U.S. growth outlook for 2025 up to 1.8% (from 1.6%) but warned that rising tariffs are likely to push inflation higher, from 2.7% this year to 3.0% in 2026.

• Oil prices climbed +1.5%, while the euro strengthened to $1.1818, with strategists eyeing a push toward $1.20.

My Take

The market is trying to digest two things at once: an AI sector that keeps expanding at breakneck speed (with ever-bigger bets from Nvidia) and a Fed that keeps reminding us not to ignore inflation risks.

For investors, it means volatility will remain high, especially in richly valued tech. Interestingly, the real winners in the AI boom might not only be chipmakers, but also the “old economy” energy firms powering those data centers.

Sometimes the future runs on silicon. Other times, it still runs on gas.

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Kristoff - ChartMill

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