November proved to be a volatile month for stocks, ultimately ending with mixed results across major market indexes. Early in the month, renewed concerns about whether AI-driven tech valuations have gotten ahead o themselves prompted investors to reassess the massive capital flowing into artificial intelligence and the elevated valuations of mega-cap technology stocks. This shift in sentiment led to three consecutive weeks of market declines. With that backdrop, it’s important to step back and look at the forces driving these swings.
Famed “The Big Short” investor Michael Burry made headlines by accusing AI “hyperscalers”, giant cloud providers such as Amazon, Google, Microsoft, and Meta, of inflating earnings. Hyperscalers invest tens of billions each year in the data centers and chips that power AI. His comments intensified concerns about whether AI investments are sustainable. Given that these companies now represent a substantial portion of the S&P 500 (1) and NASDAQ (1), their performance continues to influence the broader market heavily.
The table below illustrates the substantial heft that just eight AI stocks carry in the S&P 500 and NASDAQ 100. (1) These powerful companies offer tremendous upside, but they also concentrate risk. We want clients to participate in this innovation, but not at the expense of balance. A disciplined, diversified approach ensures we capture opportunity without getting swept up in hype or the inevitable overshoots that happen when enthusiasm extends beyond reason.
Markets rebounded late in the month heading into Thanksgiving, driven by improving economic data and renewed optimism around a possible Federal Reserve rate cut. Despite the late rally, the tech-heavy NASDAQ (1) finished November lower, while most other major indexes ended higher. Investor confidence strengthened as Fed officials emphasized growing concern over labor-market risks. Third-quarter earnings were generally strong, with S&P 500 (1) earnings up roughly 13.4% year-over-year, marking the fourth straight quarter of double-digit growth. About 83% of companies exceeded earnings expectations, well above the long-term average of 75%.
While the Fed can still sway markets day to day, its influence diminishes as we move further from the extreme COVID-era policy environment. What matters more for long-term investors is the larger structural forces shaping the economy, and AI has clearly become the dominant theme of this era. It’s already influencing how companies operate, how workers do their jobs, and how entire industries organize themselves.
As we saw in November, the key question around AI remains the same: What kind of real productivity gains and cost savings will justify the enormous capital being poured into this technology? Those answers will unfold over years, not months.
The broader arc of AI will be significant. Eventually, this investment surge will level off, likely when hyperscalers decide they’ve built enough chips and data-center capacity. Until then, the enormous demand for computing power continues to drive a surge in energy-hungry data centers at a time when AI and crypto are already putting strain on an aging and fragile power grid.
Like all major innovations, AI comes with both opportunity and risk. That’s why we stay balanced. We want exposure to the long-term potential, but not in a way that chases hype or overcommits. Our job is to help you participate wisely, stay diversified, and keep your long-term strategy front and center.
How We Are Using AI to Serve You
We have implemented a secure AI productivity tool called Zocks to help transcribe meetings and summarize notes and action items. This helps us prepare more thoroughly, stay organized, and follow through more effectively, freeing us to focus on listening, planning, and engaging with you. AI enhances our process, but it never replaces human judgment. Every recommendation remains grounded in decades of experience and tailored to your unique goals and priorities.
Zocks is the only AI tool that interacts with client information, and it is approved and monitored by our compliance partner, Kestra Advisory Services. It uses encrypted, U.S.-based storage, is SOC 2 certified and HIPAA compliant, and your data is never used to train AI models. Meeting transcripts are deleted within 24 hours, and your consent is always required before Zocks is used.
Year-end Tax Planning
As 2025 winds to a close, now is the time to look toward year-end tax planning. We are here to assist you, and the checklist below is provided to prompt you about specific topics you may want to address before the end of the year.
Year-end Tax Planning Checklist:
• Make Contributions to Retirement Accounts
• Make Charitable Contributions
• Does it Make Sense to “Stack” Deductible Items in Alternating Tax Years?
• Make Annual Gifts to Family Members
• Check Paycheck Tax Withholding Rates
• Evaluate Capital Gains and Losses; Realized and Unrealized
• Review your Estate Plan
Considering Year-End Charitable Gifts? Be Aware of 2026 Tax Changes
Clients who typically itemize deductions should be aware of charitable giving changes scheduled for 2026 under the OBBB legislation. Beginning in 2026, all itemized deductions, including charitable gifts, will be capped at 35% of Adjusted Gross Income (AGI), and charitable deductions will only apply to amounts exceeding a new 0.5% AGI floor. These changes may reduce the tax benefit of charitable giving for higher-income households. As a result, clients planning significant charitable contributions may want to consider accelerating some giving into 2025. As always, we recommend coordinating these decisions with your CPA.
Your November portfolio reports have been deposited in your eMoney vault. If you are interested in discussing them or the year-end tax planning opportunities that best align with your goals and objectives, we are conducting reviews and would love to discuss those with you. You can call us or schedule a review here.
We wish you a joyful and restorative holiday season. May this time be filled with warmth, connection, and celebration with those who matter most. We are truly grateful for your continued support, engagement, and trust throughout the year, and we look forward to many more meaningful moments in the year ahead.
Happy holidays!
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1. The NASDAQ and S&P 500 are unmanaged groups of securities considered to be representative of the stock market in general
This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning the past performance are not intended to be forward-looking and should not be viewed as an indication of future results.
A diversified portfolio does not assure a gain or prevent a loss in a declining market. There is no guarantee that any investment strategy will be successful or will achieve their stated investment objective.
