Wall Street Sees Tech Retreat as Defense and AI Stocks Lead the Charge

Dow Climbs While Nasdaq Slips Amid Rotation Out of Tech: U.S. stocks showed mixed action Thursday, with the Dow Jones Industrial Average rising 277 points, or 0.6%, while the tech-heavy Nasdaq fell 0.7%. The S&P 500 hovered near the flatline, reflecting a broader rotation away from technology stocks. Information technology was the only major sector in the red, down roughly 2%, as investors took profits on high-flying names.



AI and Tech Stocks Pull Back


Artificial intelligence standout Nvidia fell more than 2%, while fellow AI play Oracle slipped over 1%. Apple, facing its seventh straight day of losses, also retreated. While AI and tech remain key themes for 2026, analysts note that broader adoption in sectors like healthcare, insurance, robotics, and diagnostics will be crucial to sustaining the rally.



Defense Stocks Soar on Massive Budget Proposal


Defense equities were the bright spot of the day. President Donald Trump proposed a $1.5 trillion military budget for 2027, a dramatic jump from the $901 billion approved for 2026. Northrop Grumman surged about 3%, Lockheed Martin rose around 4%, and Kratos Defense jumped more than 14%. The iShares U.S. Aerospace & Defense ETF hit a record high, marking its fifth straight intraday gain and highlighting the sector’s momentum.



Energy Rebounds as Crude Prices Rise


Crude oil rebounded after slipping the previous day, with West Texas Intermediate and Brent crude each climbing roughly 1.5%. The gains follow concerns about an oversupply after reports that Venezuela would transfer 30–50 million barrels of oil to the U.S., coupled with announcements that the revenue will be used to buy American products, including agricultural and medical goods.


Corporate Moves and Upgrades


Alphabet overtook Apple in market capitalization for the first time since 2019, hitting $3.888 trillion, driven by AI initiatives and strong demand for its Tensor Processing Units.


Costco shares jumped 5% after reporting an 8.5% year-over-year sales increase in December.


Roku gained slightly after an upgrade, with analysts citing robust momentum from ad and subscription growth.


Serve Robotics soared 17%, benefiting from recognition as a “physical AI” leader with over 2,000 deployed autonomous delivery robots in the U.S.


Tyson Foods was upgraded on expectations for improving beef margins and operational improvements.


Nike faced headwinds from a slowdown in China, prompting a downgrade.


Alcoa shares retreated after a downgrade, despite strong performance over the past year.



Labor Market and Productivity Updates

U.S. productivity jumped 4.9% in the third quarter, while unit labor costs fell 1.9%, pointing to stronger output and more efficient labor. Initial unemployment claims rose slightly to 208,000, just below expectations, and layoffs in December hit their lowest level in 17 months, highlighting ongoing labor market resilience.


Small Caps Rally


The Russell 2000 index reached a new all-time high, lifted by strong gains in Serve Robotics, Kratos, Neogen, Red Cat, and Bloom Energy, all of which recorded double-digit increases.


Looking Ahead


Investors are keeping a close eye on the upcoming U.S. jobs report, corporate earnings, and global developments. While tech faces a pause, sectors tied to policy moves, defense spending, AI adoption, and energy continue to drive market opportunities.