The Dow Jones Industrial Average saw a rise on Tuesday, contrasting with stagnation in other stock indexes as the AI technology rally loses momentum. The Dow is approaching the 48,000 mark, driven by expectations of a temporary US government funding resolution that would allow for the release of crucial labour and inflation data.
Efforts are underway to pass a funding bill, ensuring federal services operate until the end of January, postponing potential political impasses. The potential reopening of the government, following the longest shutdown in US history, promises the release of essential economic figures, impacting the Federal Reserve’s interest rate decisions.
Concerns About AI Growth Expectations
Michael Burry expressed concerns about the AI tech rally’s growth expectations due to potentially flawed accounting by companies providing AI infrastructure. These companies might be understating depreciation costs, causing AI-related investments to deplete more quickly than anticipated.
Artificial intelligence, abbreviated as AI, covers fields like machine learning, neural networks, and natural language processing. It aims to create machines capable of human-like problem-solving. AI applications include generative platforms answering text queries, credit rating systems, pharmaceutical development, and content recommendation algorithms.
Companies like Nvidia, Palantir Technologies, and Microsoft play prominent roles in AI. Nvidia provides AI chips, Palantir offers data analytics platforms, and Microsoft integrates OpenAI’s technology. The ChatGPT launch in 2022 spurred an AI stock rally, with Nvidia’s stock rising significantly, raising concerns about a potential tech bubble similar to the DotCom era.
As we look at the market on November 12th, 2025, the Dow is showing strength while the AI-led tech rally is losing steam. The main focus is the expected end to the US government shutdown, which at over 40 days is now the longest in American history. This resolution is what’s propping up the Dow, but it will also unleash a flood of economic data that has been withheld for weeks.
Implications of Shutdown Ending
The end of the shutdown means we will finally see crucial inflation and labor numbers, which the Federal Reserve needs to justify the interest rate cuts the market expects. We are on edge because the last Consumer Price Index (CPI) report before the government closure showed inflation was still stubbornly high at around 3.5%. The upcoming data could either confirm a path to lower rates or force the Fed to hold firm, creating significant market volatility.
For traders, this situation suggests preparing for a sharp move in either direction. Buying options straddles or strangles on broad market indices like the SPY is a direct way to play the impending volatility from the economic data release. The CBOE Volatility Index (VIX) has been elevated near 22, reflecting this widespread uncertainty among traders about what the numbers will show.
At the same time, we see serious concerns emerging in the tech sector, specifically around the AI stocks that have driven so much growth. After gaining over 400% since early 2023, names like Nvidia are already down about 15% from their 2025 peaks. Michael Burry’s recent warning about AI companies understating equipment depreciation costs adds a new layer of risk, suggesting their reported profits may be artificially high.
This presents a clear opportunity to use derivatives to hedge against or bet on a further decline in the tech sector. Purchasing long-dated put options on a tech-heavy ETF like the QQQ or on AI bellwethers could be a prudent strategy. This allows us to position for a potential re-evaluation of the entire AI space if these accounting concerns prove valid, similar to what we saw when the DotCom bubble began to unwind back in 2000.
