Choosing the winners in the artificial-intelligence race is only getting tougher. Earnings season has complicated what had looked like a broad rotation into software rather than hardware, and investors might want to reconsider whether they can really time the AI shift. 

Markets have been waiting for value in AI to move away from component suppliers and toward software companies integrating technology successfully. A shock to highflying infrastructure names–intensified by the forced sale of stocks by AI-focused hedge fund Situational Awareness–gave another boost to that narrative this summer. 

There is some reason to believe in the software revival. Companies including Atlassian, Cloudflare, and JFrog soared this week after their earnings impressed the market. Each has an explanation for AI helping rather than hurting its business. Never mind sector darling Palantir Technologies, which surged 30% higher Tuesday on huge revenue growth while taking potshots at OpenAI and Anthropic for dreaming of dominating the global economy. 

Still, the results of going all-in on software this earnings season would have been decidedly mixed. For every Cloudflare or Palantir, there was a HubSpot or Datadog that sank. The iShares Expanded Tech-Software Sector ETF is up 10% since the start of July. That’s better than the PHLX Semiconductor Index’s 15% drop over the same period but hardly makes up for its underperformance over the longer term in the AI era. 

It’s extremely hard to stay on top of the AI software game. Just ask Google-owner Alphabet, which has gone from being praised as a leading model developer to feeling the need to radically shake up its AI research team in a matter of months. 

Staying alert to AI developments is smart, but betting on a software comeback too early can be just as damaging as arriving too late.

—Adam Clark

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Markets are moving into Friday’s jobs report, which undoubtedly will play big in the Fed’s next policy decision, with a renewed appetite for risk and a cautious tone on interest rates. There’s actually a growing chorus on Wall Street suggesting the central bank will turn toward a rate cut.

• Bond yields are extracting a little speculative froth from lending markets and job growth is slowing to a point that supports economic growth but tames inflation. If that happens, get ready. The combination could be a crucial floor of support for stocks, which already climbed to new highs this week.

• All eyes are on July’s unemployment rate. Economists expect 4.2%, unchanged from June and at the lowest levels in more than a year. Job growth, however, is slowing, with Wall Street expecting a hiring gain of 97,000. That split likely capped wage gains, which feed into inflation pressures.

• Even a tick higher on the unemployment rate could send stocks higher. Dennis DeBusschere, chief market strategist at 22V Research, says a higher rate “implies a higher speed limit on growth, while 4.1% and below is more obviously risk-off.” Bond markets are doing the Fed’s heavy lifting, he adds.

• Rate traders put the probability of a September rate hike at 55%—a sharp drop from July’s 80% and the lowest in nearly a month. Bets on increases for December have also dipped. The Iran war, of course, remains the wild card in all this, and whether a peace deal could calm oil prices.

What’s Next: Brent prices have fallen more than 20% since late July but still sit more than $10 a barrel higher than a year ago. Knapp isn’t expecting a rate hike this year, and suggests the Fed could respond to oil-driven inflation by shrinking its $6.7 trillion balance sheet.

—Martin Baccardax

The largest utility merger in history—combining NextEra Energy and Dominion Energy—is facing extra scrutiny after Virginia Gov. Abigail Spanberger pledged to intervene in the transaction’s regulatory review, potentially affecting the likelihood of the $67 billion deal going through at all.

• Spanberger, in an opinion piece in the Washington Post, said she’ll intervene in Virginia’s State Corporation Commission hearing process, formally requesting to be a party to the case. The commission, which is appointed by the state legislature, has the power to approve or deny the deal.

• In the column, Spanberger acknowledged the unprecedented step, but said she must act because of the size of the deal and its possible effects on the state. She has already been outspoken about rising utility bills, which have hit Virginia residents hard.

• She has argued for capping returns on equity at utilities and shifting more energy costs onto data centers. She’s also skeptical about an out of state utility taking over. Florida-based NextEra operates all over. It is known for renewable projects but also talks about building natural gas plants.

• Dominion CEO Robert Blue welcomes Spanberger’s involvement and points to the $1.78 billion in bill credits that the companies say will go to Virginia ratepayers if the deal goes through. NextEra noted that Dominion will remain a Virginia utility after the deal, governed by state regulators.

What’s Next: State hearings are supposed to begin in early November. If approved, the merger is slated for completion sometime in the second half of 2027.

—Avi Salzman and Liz Moyer

It once seemed likely that a major crypto bill would become law this year, but now that is in doubt. As of Thursday afternoon, there was no set plan to hold a vote on the Clarity Act, which would put most digital-asset trading out of the purview of securities laws.

• It had been a major goal of the crypto exchange Coinbase and other firms, which have spent years lobbying and making campaign contributions to pro-crypto lawmakers just to get to this point. They wanted to pass the bill before the Senate recess at the end of this week.

• Logistics have been tricky. To avoid a filibuster, the bill needs votes from at least 60 senators to advance, meaning at least seven Democrats would need to back it. Plus, the Senate’s calendar is already full, including a vote to confirm Todd Blanche as Attorney General and funding bills.

• The second—and more important—problem for the crypto industry is that, as of Thursday, the Clarity Act wouldn’t get the vote of every GOP senator, let alone the Democrats it needs. Missouri’s Sen. Josh Hawley is opposed to it as currently written and Kentucky’s Sen. Mitch McConnell has been ill.

What’s Next: A failure to reach a vote could pressure Coinbase shares even if it continues to benefit from Wall Street’s crypto embrace. The stock rallied 11% in July after the Trump administration agreed to adding an ethics provision to the bill. A dead bill could bode ill for the stock.

—Joe Light

Sweetgreen was showing signs that a turnaround was gaining traction, then an unrelated food-borne illness swept across multiple states and deterred people from eating lettuce. That’s where the outlook comes in. The salad chain sharply cut its 2026 forecast warning of potentially weaker demand.

• For the quarter ended in June, revenue rose 3.8% from a year earlier to $192.7 million, but came slightly below expectations. A 22 cent loss a share also fell below forecasts, and same store sales dropped 6.2% in the quarter.

• Sweetgreen management said demand for fresh prepared foods has weakened since mid-July because of the multistate cyclosporiasis outbreak, despite not selling the affected produce. Nevertheless it expects same-store sales to fall 7% to 8% for fiscal 2026, versus its previous forecast for a 2% to 4% decline.

• The gloomier outlook is especially painful because things had been improving before the outbreak. Although same-store sales remained lower than a year ago in the June quarter, the trends improved from a 12.8% decline in the previous three months.

• Placer.ai estimated that same-store visits rose 1% in May and 3.9% in June, partially thanks to Sweetgreen’s nationwide wrap sandwich launch. The firm found that traffic at Sweetgreen weakened for just a week after the outbreak became public, but has recovered since then. 

What’s Next: Investors now must assess whether the sales shock fades quickly or continues to disrupt Sweetgreen’s fragile turnaround as the broader consumer remains anxious over fresh produce.

—Evie Liu

—Newsletter edited by Liz Moyer, Patrick O’Donnell, Callum Keown