AI Still Drives the News, But a Small-Cap Revolution is Brewing[Stocks](https://moneymorning.com/category/article/stocks/) # AI Still Drives the News, But a Small-Cap Revolution is Brewing  by Rich Duprey  October 7, 2025  Share it: ## **Today’s Top & Bottom Lines – October 7, 2025** | | | | --- | --- | | #### **Pre-Market Price Check** | | **S&P 500 Futures: (-0.05%)** | **10-Year Yield: (+0.01%) 1.3 bps** | | **Nasdaq 100 Futures: (+0.00%)** | **WTI Crude: $61.74 (+0.08%)** | | **Dow Jones Futures: (-0.16%)** | **Gold Futures: 3,982 (+0.16%)** | | **VIX: 16.52 (+0.92%)** | **Bitcoin (BTC): ~$124,312 (+0.38%)** | ## **What’s Driving Stocks This Morning** Stocks are looking to open lower this morning a day after the S&P 500 and Nasdaq closed at new highs again yesterday. Small-cap stocks, however, continued their run-up with the Russell 2000 index setting a new all-time high and closing above the 2,500 level for the first time ever. Although artificial intelligence continues to be the driving force in the market today, with Advanced Micro Devices (AMD) surging 24% following a deal with OpenAI, valuation concerns with the biggest players like Nvidia (NVDA) has investors looking for better opportunities. Small-cap stocks fill that void well. Having lagged behind their larger peers for years in a high-interest rate environment that made access to growth capital more difficult, a switch to a more accommodating rate policy by the Federal Reserve begins to open more avenues for expansion for them. Although the performance of the S&P still leads the Russell for the past 12 months, narrowing the focus to the period after the April market crash and the small-cap index has turned on the afterburners. The Russell 2000 has gained 35% to the benchmark index's 30%, with the gap between them beginning to widen. The S&P 500 has made most of its gains on the concentration of performance by the Magnificent 7 stocks, which also concentrates the risk of a sharp correction should they stall. Because the Russell 2000 is much more broad-based and represents a class of stocks that have been depressed for so long, expect to see that gap widen further. **The Big Picture:** Small-cap stocks are ready for their day in the sun after having toiled in the shadow of their larger brethren for so long. Risk of a large-cap pullback has increased as the tech-heavy S&P 500 and Nasdaq advance to new all-time highs on the backs of a relative handful of stocks. That risk is also evident in gold, which also continued to push above $3,900 per ounce, and is likely to break through the $4,000 per ounce threshold before the end of the week. Silver is also on a tear, outrunning gold by nearly 2-to-1 over the past month. The move to safe-haven assets – Bitcoin (BTC) closed above $125,000 for the first time – shows the market's appetite for risk is being hedged. ## **Stocks on the Move (Pre-Market)** - **IBM (IBM)** $304.95 +5.3% \- The tech giant announced a major partnership with Anthropic to advance enterprise software development and unveiled significant advancements in its AI software and infrastructure for enterprises. - **Micron Technology (MU)** $195.97 +2.6% - The chipmaker is benefiting from numerous analyst upgrades following its earnings report that saw shares tumble. - **AppLovin (APP)** $565.58 -3.7% \- The mobile and gaming marketer is reported under SEC investigation for its data collection practices. - **Advanced Micro Devices (AMD)** $212.46 +4.3% \- The chipmaker continues its run higher after signing massive deal with OpenAI - **Dollar Tree (DLTR)** $84.04 -4.2% \- The deep discounter is falling after an analyst downgraded cited inflation, tariffs, and execution risks tied to management creating a "complex" business out of a simple one. - **DR Horton (DHI)** $167.00 -2.6% \- The biggest homebuilder is falling on no company-specific news, but is leading the entire sector lower. ## **Upgrades & Downgrades** **Upgrades:** - **Affirm (AFRM)** upgraded to Buy at Rothschild Co & Redburn, tgt $101 - **Brinker (EAT)** upgraded to Buy at BofA Securities, tgt $192 - **Ford (F)** upgraded to Hold at Jefferies, tgt $12 - **Micron Technology (MU)** upgraded to Overweight at Morgan Stanley, tgt $220 - **LVMH (LVMUY)** upgraded to Overweight at Morgan Stanley **Downgrades:** - **Abercrombie & Fitch (ANF)** downgraded to Neutral at JPMorgan, tgt $103 - **AT&T (T)** downgraded to Sector Perform at Scotiabank, tgt $30.25 - **Boston Beer (SAM)** downgraded to Neutral at Citigroup, tgt $235 - **Lithium Americas (LAC)** downgraded to Sector Underperform at Scotiabank, tgt $5 - **ASML (ASML)** downgraded to Neutral at New Street ## **Today’s Bottom Line:** Yesterday's deal between AMD and OpenAI shows just how powerful AI remains in driving stock valuations. The agreement will see the chipmaker supply 6 gigawatts of its Instinct series accelerators to power OpenAI’s next-gen AI infrastructure. In exchange, OpenAI will take a 10% stake in AMD. While this deal and a similar one between Nvidia and OpenAI are hailed as proof of the enduring demand for AI, there is also a growing concern about the circular nature of the deals with the chipmakers essentially paying the customers to buy their AI chips. Nvidia will be investing $100 billion in OpenAI over time as the AI shop buys some 10 GW of NVDA's newest Vera Rubin accelerators under development. Although it skews the real-world view of what actual demand is, the markets are eating up these announcements and AMD is now within reach of hitting a new all-time high itself.  **Beat the market, without relying on brokers or biased institutions.** Email(Required) Phone This field is for validation purposes and should be left unchanged. 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