Stock market zooms toward Thanksgiving as AI plays surge

• StockStory Top Pick NVDA +1.37%
• GOOG -1.04% ^IXIC +0.82% ^GSPC +0.69% ^DJI +0.67%

Major U.S. stock indexes appeared set to open in the green on Wednesday. S&P 500 futures rose 0.25% in pre-market trading, the Nasdaq moved up 0.4%, and the Dow Jones Industrial Aveerage just nudged into positive territory after solid gains on Tuesday.

Following last week’s volatility, this week’s mostly consistent positive trading looked set to allow investors a long, pleasant holiday week and weekend. But beneath the placid surface, surprising news made ripples across major sectors — from usually quiet retail plays, to marquee-name AI stocks, and finally to the beleaguered agricultural sector.

News of a potential Alphabet-Meta deal upends tech's usual order

A potential Alphabet-Meta chip deal is upending tech's usual order. On Tuesday, Alphabet rocketed toward a historic $4 trillion valuation, while Nvidia — usually the center of the AI universe — sat around $4.3 trillion following its multi-day post-earnings selloff.

Alphabet has added nearly $1 trillion in market cap over the last six weeks, driven to new heights by unusually positive early reception to its newest Gemini AI model, a rapid shift in investor sentiment, and the surprise revelation that Warren Buffett’s Berkshire Hathaway built a first-ever multibillion-dollar stake in the company during the third quarter.

Now add in the possibility that Meta might buy or rent Alphabet’s homegrown AI chips, and investors are suddenly seeing Alphabet not as a lagging legacy shop but as a legitimate challenger in AI hardware. Even if no deal materializes, the fact that Meta, among the globe's biggest spenders on compute, would consider shifting budget away from Nvidia signals just how dramatically the landscape may be changing.

Elsewhere, the AI trade continues to grab headlines

Also on Tuesday, HSBC projected the S&P 500 could hit 7,500 by the end of 2026, primarily because of the AI capex cycle, which the bank expects to continue or even intensify. But HSBC also pointed to the “two-speed economy” that remains firmly in place — strong spending at the high end, choppier waters beneath.

Earnings news echoes the 'two-speed economy' split

On Wednesday morning, Deere & Co. reported ongoing challenges in large equipment demand as individual and industrial buyers have pulled back — yet another data point showing tough conditions outside tech. It’s been a particularly challenging year for the famed tractor company as trade wars disrupted old incentive patterns and American farmers, wary of macroeconomic uncertainty, delayed large capital outlays.

In retail news, Abercrombie & Fitch raised eyebrows on Tuesday with a nearly 40% rally in the stock after posting same store sales strong enough to power a near-total rerating.

It’s a bright spot as retailers head into Black Friday with one eye on foot traffic and the other on online sales. Value-oriented retailers like Walmart are benefitting from thriftier consumer practices, while Target is struggling to encourage the middle and upper-middle classes to splash out on holiday purchases.