For three years, tech behemoths have been fueling a bull market on the promise that AI advancements will increase efficiency and profitability. But with investors growing skeptical, and with the continued war in the Middle East, the Nasdaq is now in correction territory after its worst week in nearly a year:

• The index is down 11% since it peaked in October and is doing its best New York Giants impression with 10 weekly losses over the past 11 weeks.
• Two of the biggest drains since late-October are two of the biggest spenders in AI computing—Microsoft (down 34%) and Meta (down 29%).
• Even Nvidia, the AI chipmaker that has everyone throwing money at it like it’s in one of those windy cash booths, is down nearly 20% from its October high.
• As a group, Magnificent Seven shares are down 8% since late October.

Microsoft is having its worst quarter since the 2008 global financial crisis. The stock is down 25% as shareholders recoil from the company’s move to continue spending on AI infrastructure. There are also fears that startups like OpenAI and Anthropic will create agents that can replace products made by companies like Microsoft.

Tech’s slide is in keeping with the market as a whole. Remember when US Attorney General Pam Bondi let the world know the Dow was over 50,000 at a congressional hearing in February? After dropping nearly 800 points yesterday, it, too, fell into correction territory from its record high on Feb. 11.

TACO is growing stale

On Thursday, President Trump extended the deadline for peace negotiations with Iran by 10 days. However, markets didn’t rebound like they had in similar situations that have spurred the so-called TACO trade (an acronym for Trump Always Chickens Out).

Instead, crude prices soared to $110 per barrel yesterday, stoking inflation fears. This could be because, while Trump backed down, Israel threatened escalation, and Iran has been resistant to peace talks. Analysts believe the TACO tactic is carrying less weight due to the disconnect between the US and Iran.

But…Big Tech stocks could be viewed as a relative bargain, and a resurgence would almost certainly translate into good news for the markets overall.—DL

House leaders reject Senate compromise, likely prolonging DHS funding fight. In yesterday morning’s early hours, the Senate passed a bill that would fund most of the Department of Homeland Security—except for Immigration and Customs Enforcement and Border Patrol. But with senators having already left town for a two-week recess, House Republican leaders said they wouldn’t bring that bill up for a vote, instead backing a short-term funding measure for all of DHS. That’s likely to extend the partial government shutdown, as the Senate probably won’t approve the House version even after they return. But the chaos at airports could end sooner, as DHS says TSA employees will start getting paid as soon as Monday under the president’s executive order.

The market expects the Fed to raise rates. A month ago, traders thought the Fed was poised to cut interest rates, but with oil prices on the rise amid the Iran war—which could drive up inflation—many are now predicting an increase instead. Traders in the futures market put the probability of a rate hike this year at 52%, CNBC reported, citing the CME Group FedWatch tool. Meanwhile, Yahoo Finance noted that CME data shows investors seeing 20% odds of a rate raise by September—even though they considered the odds 90% for a rate cut by September just last month.

Trump’s signature to go in your wallet. Not since John Hancock has a signature loomed so large for America: President Trump is about to become the first sitting president to have his signature on US paper currency. Traditionally, the Treasury Secretary and the Treasurer are the ones whose signatures appear, but the Treasury Department said this week it’d be putting the president’s on to honor America’s 250th anniversary. The department is also controversially planning a commemorative coin featuring Trump’s image for the anniversary, although critics have pointed out that federal law prohibits showing a living president on US money.—AR

New Disney CEO Josh D’Amaro may have accidentally wished upon a monkey paw instead of a star. It’s only been a week and a half since he took over for Bob Iger, but that was more than enough time for things to get goofy, as the company has dealt with a trifecta of setbacks in TV, AI, and gaming.

Less than 24 hours after D’Amaro took over, a domestic violence scandal involving The Bachelorette star Taylor Frankie Paul derailed the new season of the show before it even aired on Disney-owned ABC. Five days later, D’Amaro’s dream of a more interactive and immersive Disney experience was hit with a one-two punch:

• OpenAI suddenly said sayonara to Sora, its popular AI video-generation app, wiping out a planned three-year, $1 billion partnership with Disney that would have allowed users to create videos with the Mouse House’s iconic characters.
• Epic Games, with whom Disney still plans to set up a digital universe, announced it was cutting 1,000+ jobs, citing a drop in engagement with its popular Fortnite game.

The future is D’Amaro: While Disney can always find another AI video partner, the Epic Games development is particularly tough to swallow for D’Amaro, who led the effort to invest $1.5 billion in the gaming company when he was chairman of Disney Experiences in 2024.—BC