AI Stocks Stumble

A Deep Dive into the Market Selloff

The stock market took a sharp turn lower today, with major indexes down nearly -2%, bringing 2025’s year-to-date gains dangerously close to being erased. While the overall decline may not seem catastrophic on the surface, many individual stocks have been hit much harder, entering deep bear market territory. The pain has been particularly acute for high-profile names such as Tesla, which has plunged -30% in just 60 days, and other once high-flying stocks that have suffered -15%, -20%, and even -30% losses over the past few months.

A Crumbling Foundation: Economic Weakness Begins to Show

The recent market turmoil is being exacerbated by growing concerns that the economy may not be as resilient as many investors once believed. January’s retail sales report showed a nearly -1% decline, far below expectations, shattering hopes for continued consumer strength. This signals potential trouble for a market that has been heavily reliant on consumer spending to fuel earnings growth.

Meanwhile, home prices have fallen nearly -10% (median price is $396,000 down from its peak of $426,000) in just a few months, as rising mortgage rates—spurred by stubborn inflation—continue to squeeze affordability all while supply is up almost 20% year over year.

Speculation at Its Peak: Retail Investors Betting Big on Risky Plays

Despite these clear warning signs, many retail investors have continued to pile into some of the most speculative corners of the market. Call options activity has surged to record levels, with traders aggressively betting on high-growth, high-risk stocks like Palantir, Robinhood, and CrowdStrike—all of which have tumbled nearly -15% this week alone.

These stocks, many of which trade at valuations that defy traditional financial logic, are proving particularly vulnerable to market pullbacks, underscoring the dangers of unchecked speculation. Meanwhile, investors (mainly retail) still can’t buy enough Out of the money call options on Nvidia. This is an extremely leverage risk taking that the price of Nvidia stock will be much higher after it reports earnings next week.

Valuations Under Pressure: The Most Overvalued Market in U.S. History?

If you haven’t yet explored our previous reports, be sure to check out our latest in-depth analyses on broader economic trends and strategic investment approaches to navigate the current downturn effectively (in the links below).

Year of The Bear

Tesla Earnings

Spotting Suckers on Wall ST

Tariffs Are Coming

Nvidia Bill Due