Welcome to Investing Insights. I'm your host, Ivana Hampton. The stock market has cooled on stocks caught up in the whirlwind of artificial intelligence.Fears over whether AI will disrupt a variety of sectors have triggered big sell-offs. Morning Star equity analysts have investigated 132 companies to determine whether that's the case and they have concluded that AI is not a universal destroyer. The team thinks investors should sort through the wreckage and find newly cheap companies with enduring competiti ...

Market Overview - All three major U.S. stock indexes experienced daily and weekly declines, with the small-cap Russell 2000 closing at its lowest point of the year [1][9] - The Dow Jones Industrial Average fell by 119.38 points (0.26%) to 46,558.47, the S&P 500 decreased by 40.43 points (0.61%) to 6,632.19, and the Nasdaq Composite dropped by 206.62 points (0.93%) to 22,105.36 [7][9] Energy Market Dynamics - Crude oil prices fluctuated, with front-month WTI crude futures settling at $98.71 per barrel (up 3.11%) and Brent crude at $103.14 (up 2.67%), marking the first time Brent settled above $100 since August 2022 [6][10] - The International Energy Agency indicated that the ongoing conflict in Iran could lead to the largest-ever disruption in global crude supply [6][10] Economic Indicators - The Commerce Department revised fourth-quarter GDP growth downward, contributing to a series of disappointing economic indicators [6][10] - The Personal Consumption Expenditures report showed minimal movement in the U.S. Federal Reserve's preferred inflation gauge, while demand for durable goods weakened [6][10] Sector Performance - Among the 11 major sectors of the S&P 500, technology shares recorded the largest percentage loss, while utilities saw the largest percentage gain [8][10] - The S&P 500 financial sector fell by 3.4% over the week amid rising concerns over credit quality [8][10] Stock Performance - Declining issues outnumbered advancers on the NYSE by a ratio of 1.9-to-1, with 71 new highs and 185 new lows recorded [8][10] - On the Nasdaq, 1,714 stocks rose while 2,966 fell, resulting in a 1.73-to-1 ratio of declining issues to advancers [8][10] - The S&P 500 recorded 13 new 52-week highs and 11 new lows, while the Nasdaq Composite had 33 new highs and 193 new lows [9][10] Investor Sentiment - Market volatility has been described as emotional, making it challenging to trade or invest effectively [3][10] - Analysts suggest that investors should adopt a wait-and-see approach as market conditions may take weeks to stabilize [5][10]

Economic Overview - The financials-heavy Dow is experiencing its largest monthly losses since December 2024, primarily due to a sharp slowdown in economic growth reported by the Commerce Department [1][11] - Economic growth slowed more sharply in the fourth quarter, with downward revisions to consumer spending and business investment, although consumer spending increased slightly more than expected in January [11] - Traders are now anticipating one 25 basis point interest rate cut by the Federal Reserve by June 2027, a change from earlier expectations of two cuts [11] Energy Market Impact - Crude oil prices are hovering near $100 per barrel, influenced by ongoing hostilities in the Middle East, which complicates economic conditions [4][11] - Efforts to stabilize oil prices, including record emergency oil releases by the International Energy Agency and a U.S. license for purchasing stranded Russian oil, have not yet succeeded in reducing costs [5][11] Consumer Sentiment - The University of Michigan's survey indicates a decline in consumer sentiment in early March, driven by concerns over rising energy costs [4][11] Financial Sector Developments - The broader S&P 500 financial sector fell by 2.7% for the week, with credit quality concerns deepening as Morgan Stanley halted redemptions at one of its private credit funds [6][11] - JPMorgan Chase has restricted lending to private credit players, while Blackstone is facing a surge in redemptions [7][11] Sector Performance - Six of the 11 S&P 500 sectors saw gains, with utilities leading with a 1% rise, while heavy-weight tech stocks fell by 1.1% [6][11] - Travel stocks are mixed, with Alaska Airlines and American Airlines down by 1.2%, while Carnival rose by 1.3% [9][11] - Design software maker Adobe's stock fell by 6.6% amid leadership changes and concerns over its strategy in the face of AI disruption [9][11] Market Trends - The S&P 500 recorded 11 new 52-week highs and 7 new lows, while the Nasdaq Composite saw 29 new highs and 123 new lows, indicating a mixed market environment [10][11]

Group 1 - NetAPP reported Q3 FY2026 net revenue of $1.71 billion, slightly above Wall Street's expectation of $1.70 billion [1] - The company raised its full-year revenue guidance for FY2026 to a range of $6.77 billion to $6.92 billion, up from the previous guidance of $6.63 billion to $6.88 billion [1] - For Q4 FY2026, NetAPP expects net revenue between $1.80 billion and $1.95 billion, with the lower end in line with Wall Street's $1.80 billion expectation and the upper end significantly higher [1] Group 2 - NetAPP is a leading hybrid cloud data services and data management company based in San Jose, California, providing unified data storage solutions across on-premises, private cloud, and public cloud environments [1] - The demand for high-performance storage driven by AI workloads has significantly increased, reflecting a growing focus on data management solutions as enterprises continue to invest in data infrastructure [1] - Other technology companies, such as Autodesk and CoreWeave, also reported better-than-expected earnings during the same period, indicating a robust level of enterprise IT spending [2]

Core Insights - The rapid adoption of artificial intelligence (AI) is leading to significant job losses in various industries, with Goldman Sachs estimating that AI was responsible for 5,000 to 10,000 monthly net job losses in the most affected U.S. sectors last year [1] - AI accounted for 7% of total planned layoffs in January, indicating a growing trend of companies restructuring their workforce in response to automation [1] Company Layoffs Linked to AI - AGORA plans to lay off up to 166 employees, or 6.56% of its workforce, to improve its digital business [2] - ALLIANZ intends to cut up to 1,800 jobs in its travel insurance division due to AI replacing manual processes [3] - AMAZON confirmed 16,000 corporate job cuts as part of an AI and efficiency-driven overhaul [3] - AUTODESK will reduce about 1,000 jobs, approximately 7% of its global workforce, to focus on cloud and AI initiatives [4] - BRITISH AMERICAN TOBACCO announced an AI-driven productivity program that will lead to unspecified job cuts [4] - DOW plans to cut about 4,500 jobs, which is 13% of its total workforce, by streamlining processes through automation and AI [5] - HP INC expects to cut 4,000 to 6,000 jobs globally by fiscal 2028 as it adopts AI [5] - MERCADOLIBRE laid off 119 employees as part of its AI expansion [6] - META is cutting over 1,000 jobs at its Reality Labs unit and around 600 positions in its Superintelligence Labs to pivot towards AI devices [6] - NIKE is laying off 775 employees to enhance profits and increase automation [7] - PINTEREST plans to cut up to 15% of its workforce to focus on AI roles and strategy [7] - SEB announced a restructuring plan that may impact up to 2,100 jobs worldwide by 2027 due to AI [8] - TELSTRA plans to cut 650 jobs in an AI-driven restructure [9] - WISETECH will reduce about 2,000 jobs, nearly one-third of its global workforce, as it integrates AI into its operations [9]

Economic Data - U.S. durable goods orders fell -1.4% m/m in December, better than the expected -1.8% m/m, while core durable goods orders rose +0.9% m/m, exceeding expectations of +0.3% m/m [1] - U.S. December housing starts increased +6.2% m/m to 1.404 million, surpassing expectations of 1.310 million, and building permits rose +4.3% m/m to 1.448 million, above the expected 1.400 million [1] - U.S. industrial production rose +0.7% m/m in January, stronger than the anticipated +0.4% m/m [1] Stock Market Movements - Wall Street's three main equity benchmarks closed higher, with Global Payments (GPN) surging over +16% after issuing above-consensus FY26 adjusted EPS guidance [2] - Micron Technology (MU) rose more than +5% and Applied Materials (AMAT) gained over +2% [2] - Palantir Technologies (PLTR) increased more than +1% following an upgrade from Mizuho [2] - Palo Alto Networks (PANW) fell over -6% after cutting its full-year adjusted EPS guidance [2] Investor Sentiment - Investors are awaiting new U.S. economic data, remarks from Federal Reserve officials, and Walmart's earnings report [3] - Renewed caution about the outlook for AI has negatively impacted sentiment, with most members of the Magnificent Seven stocks edging lower in pre-market trading [3] Geopolitical Concerns - Investors are concerned about the potential for U.S. military intervention in Iran, despite progress in nuclear talks [4] - The U.S. has reportedly assembled its largest air power presence in the Middle East since 2003, raising tensions [4] - WTI crude prices rose above $66 a barrel amid these geopolitical tensions [4] Federal Reserve Insights - U.S. rate futures indicate a 94.1% chance of no rate change and a 5.9% chance of a 25 basis point rate cut at the March FOMC meeting [6] - The FOMC minutes revealed that several policymakers suggested potential rate increases if inflation remains above target [5] - A majority of participants noted that downside risks to employment have moderated, while persistent inflation risks remain [5] Upcoming Economic Reports - U.S. Initial Jobless Claims data is expected to show a figure of 223K, down from 227K last week [6] - The Philadelphia Fed Manufacturing Index is anticipated to drop to 7.5 in February from 12.6 last month [7] - Trade Balance data is expected to show a narrowing deficit to -$55.5 billion in December from -$56.8 billion in November [7] - Pending home sales data is expected to rise +1.4% m/m in January after a -9.3% m/m drop in December [8] Corporate Earnings - Notable companies reporting quarterly figures include Walmart, Deere & Company, and Newmont [10] - Figma surged more than +11% in pre-market trading after posting strong Q4 results and guidance [16] - DoorDash climbed over +10% after reporting better-than-expected Q4 marketplace gross order value [16]

Core Insights - Figma's IPO was priced at $33 per share, surged to $122, but has since dropped approximately 80% to around $24 as of February 2 [1] Company Overview - Figma is a design company that enhances collaboration in user interface (UI) and user experience (UX) design, similar to how Google Docs improved document collaboration [2][3] - The platform allows real-time collaboration in the cloud, distinguishing itself from traditional software solutions [3] Customer Growth - Figma reported 1,262 customers with an annual recurring revenue (ARR) of at least $100,000, and 12,910 customers with an ARR of at least $10,000, marking increases of 385 and 3,148 year-over-year, respectively [4] - The growth in high-value customers is significant as they tend to have longer retention and deeper integration into design processes, with about 30% using Figma's AI tool weekly [5] Financial Performance - Figma's revenue increased by 38% year-over-year to $274.2 million, with its annual revenue run rate surpassing $1 billion for the first time [6] - The company reported an operating loss of approximately $1.1 billion, primarily due to $975.7 million in one-time stock-based compensation, a common occurrence for newly public companies [8]

Group 1: AI Transformation in Software Industry - Artificial intelligence (AI) is changing the software sector from static logic to outcome-based assistants, enhancing user goal achievement [1] - Design software is a key area for AI impact, with companies like Figma and Adobe being closely watched [2][3] Group 2: Adobe's AI Strategy - Adobe faces potential threats to its design software relevance due to AI's ability to create content easily, leading to a 30% drop in share price over the past year [5] - The company's strategy involves integrating AI into its offerings, including over 25 different AI models and launching its proprietary AI platform, Firefly [6][7] - Adobe's AI integration has resulted in a 15% year-over-year increase in monthly active users and record customer bookings exceeding $1 million, with over 25% growth in customers spending at least $10 million in annual recurring revenue [8]

Core Insights - Flora, a design tool widely used by companies like Alibaba and Lionsgate, has achieved a milestone by securing $42 million in Series A funding led by Redpoint Ventures [1][9] - The tool leverages generative AI models to enhance the design process, allowing users to create media assets through images, text, or video inputs [1][6] - The rise of generative models has made AI-focused startups increasingly attractive, with significant investments in similar tools [6][9] Funding and Growth - Flora's total funding to date has reached $52 million following this latest round [10] - The company plans to use the new funds to expand its sales team and increase marketing efforts, aiming to enhance its product offerings [7][9] Product Features and Market Position - Flora enables users to create and iterate on media concepts easily, providing a streamlined workflow that integrates traditional editing functions [6][7] - The subscription model starts at $16 per month, with tiered pricing for larger enterprises [7] - The tool is designed to be user-friendly, appealing to both creative professionals and individual users [7][8] Leadership and Vision - CEO Weber Wong emphasizes the need for a new creative interface that connects different models and simplifies the design workflow [6][7] - The company aims to educate users on effectively utilizing Flora, collaborating with various institutions to enhance user experience [7][9]

Core Insights - Pinterest plans to reduce its workforce by less than 15%, translating to fewer than 780 positions, to focus on artificial intelligence roles and strategy [1][3] - The company's stock fell nearly 10% following its AI strategy announcement, indicating a lack of investor enthusiasm amid competition from TikTok and Meta-owned platforms [1][5] - Analysts suggest that the layoffs appear more defensive than strategic, lacking clear cost savings or a defined path to AI-driven revenue growth [2][7] Company Actions - Pinterest had 5,205 full-time employees as of September last year, and the job cuts will also involve closing smaller office spaces related to acquisitions [3] - The company expects pre-tax restructuring charges between $35 million and $45 million and aims to complete the restructuring plan by the end of the third quarter [7] Industry Context - Other companies, such as Autodesk, are also cutting jobs (7% of its workforce) to redirect investments towards AI initiatives, reflecting a broader trend in the tech industry [4] - The job cuts in the tech sector are part of a larger pattern, with over 123,000 employees laid off from 269 companies in 2025, as tracked by Layoffs.fyi [8]