Good afternoon/evening. A little late today as we were running around near the close. QQQs +80bps with nice follow through on yesterday’s strength although a lot more red on my screen today. Semis +2% led the way higher again, with memory and HDDs joining the party while CPUs continued to show strength.
The price action in the Consumer Agentic winners vs. losers trade wasn’t as extreme as yesterday, but flows are still going into the former and out of the latter. Outside CPUs, perceived winners such as TWLO +7%, SHOP +7%, & OKTA +3% outperformed, while losers fell, with OTAs down 2-3% and DASH/CART/AMZN/GOOGL down 1-2%. We discussed the bull/bear read-throughs on all of these in more detail yesterday in our EOD wrap.
The agentic consumer loser trade expanded outside of Tech today, following the typical pattern of a theme’s impact making its way through the market. Insurers (Progressive -2.5%; Allstate -6%), read-through being agents can silently scan rates, re-shop at renewal, and switch policies with little user effort, threatening retention and pricing power that rely on people not bothering to compare. Same worry around how insurance gets sold (BRO -3.4%, WTW -1.8%). Telecom and cable same story: CHTR -6.9%, CMCSA -2.9%, VZ -2.8%, TMUS -2.2%, T -1.8%, as X is full of people posting about Muse getting their Verizon/AT&T bills cut. Throw in “consumer inertia” names like PLNT -9% and NYT -7% where Muse can dump whatever subscription you aren’t using.
Some were even saying the weakness in banks and wealth/brokerage (JPM -3%, WFC -3%, MS -2.9%, SCHW -6%) was due to the read-through from Muse: it can handle bill negotiation, account shopping, financial tasks, and potentially wealth advice or switching. That seems like a bit of a stretch, though (the sector also underperformed bc of the flattening 2s-10s yield curve and fears around peak trading volumes/a Dem sweep).
Regardless, the broader point is that agents don’t need to replace these businesses to pressure their economics. Muse is like having someone work full-time to get you, the consumer a better deal. Some of what investors have called pricing power and customer loyalty may simply have been people having better things to do; Muse removes a lot of that friction with just a quick text. We wanted flying cars and got Twitter; now we want superintelligence and apparently get $17 off our wireless bill first.
Outside of that, the bifurcation between winners and losers that we’ve been seeing over the past months has become even more pronounced this week, particularly in internet and software. In internet, the dynamic has been driven by the consumer agentic trade. In software, it’s more of the same we’ve seen all year: perceived AI losers continue to underperform (ADBE, HUBS, MNDY, INTU, PATH), names like NOW/WDAY/CRM hover in no man’s land, and AI winners (Tier 1: SNOW, NET, TWLO, PLTR; Tier 2: U, DDOG, MDB) and cyber outperform. Saw more of that today as people position themselves ahead of the OAI Dev Day. In theory, Muse adds urgency for frontier labs to move up the stack into software: if a MUSE-like product can deliver what users need without a clear frontier-model advantage, the labs have more incentive to own the software and workflows rather than just supply the intelligence underneath. For example, someone in Slack said “So I find MUSE incredible. I had a server running 24/7 with Claude before that this replaces a lot of use cases for.”