📉 Down and outage

What’s going on here?

A software update from US cybersecurity firm CrowdStrike sparked a massive global tech outage on Friday, grounding 21,000 planes, halting business, and generally wreaking havoc.

What does this mean?

Software updates are irritating at the best of times. But when they snarl millions of Microsoft devices, shutting down airlines, banks, grocery checkouts, and logistics all around the world, that’s next level. Now, CrowdStrike’s tech is used by dozens of industries to protect against disruptions, hacks, and outside breaches. So the irony wasn’t lost on folks that it was an update to its system that sent Microsoft Windows crashing, with users encountering the dreaded “blue screen of death” error.

Why should I care?

For markets: Help desks.

The good news is that the snafu wasn’t the result of a cyberattack, according to CrowdStrike. Markets hate uncertainty, and an attack at such a scale would’ve brought plenty – along with fears of retaliation. After just a few chaotic hours, life slowly returned to normal, and US markets kept a mostly even keel. CrowdStrike, on the other hand, didn’t fare so well: its share price plunged more than 10%. And it’s not just that the flub was a bad look for the company: there’s also the expectation that someone will have to foot the bill for the things that went wrong.

Bigger picture: Predict the unpredictable.

It was a tough end to a difficult week. Investors have become increasingly jittery about AI overspending and tariff threats, and they’ve been selling off tech stocks. That’s left some folks nursing pretty heavy losses. Still, there’s a lesson in all this: a balanced portfolio can help weather unforeseen “black swan” events like this one. And that means looking across different industries and countries for your stock mix, adding in some bonds, and considering other assets like crypto, commodities, and real estate.

What’s going on here?

OpenAI is buddying up to Broadcom, roping in the semiconductor whiz to whip up a new chip that could help it stay ahead of the competition.

What does this mean?

The mastermind behind ChatGPT plans to put some space between itself and the uber-popular Nvidia, broadening its circle of friends across the supply chain. After all, the name of the AI game is capacity – whether that’s chips, energy, or computing. And though Broadcom’s tech may be no match for Nvidia’s right now, that could soon change. In the meantime, OpenAI’s playing like it’s multi-dimensional chess, widening its sphere of influence while launching new chatbot formats. Just this week, the firm debuted GPT-4o Mini: a smaller, 60% cheaper version of its flagship service. Until now, it’s been all about launching the biggest and baddest AI models – but smaller is useful too. Compact models can be more profitable for business clients using AI just for specific tasks.

Why should I care?

Zooming out: Princes or paupers.

Innovation is king in the AI race, and you can’t fit too many bottoms on the throne. Plus, those crowns don’t come cheap: investors are fretting over whether Big Tech’s eye-watering AI spending spree will ever pay off. The likes of Microsoft, Alphabet, and Amazon are betting massively on AI being the ultimate game-changer. And that’s led to the fastest and biggest infrastructure rollout in history – with more and more data center projects in the works. All the while, investors are still waiting for payoffs from virtual reality, the metaverse, and blockchain.

The bigger picture: Showstoppers.

Understandably, some tech-weary investors have turned their beady eyes to smaller companies. That’s pushed the small-cap Russell 2000 index up over 9% in the past month. The real test will be whether those little guys can hold folks’ attention: earnings season is just kicking off, and superstar tech stocks have a way of stealing the spotlight.