Will AI bring actual value to the world beyond Ghibli-fying selfies and the admittedly priceless ability to brainstorm bizarre recipes like a PB&J-and-Sriracha hot dog? Inquiring investors want to know.

Tech stocks continued to tank on Wednesday, with the Nasdaq slipping for the second straight day. AI software company Palantir plummeted about 20% from recent highs, while chipmakers like Micron and Intel and a wide array of other tech stocks dipped by single digits.

Part of the pullback comes from investors spooked by an MIT report that checked in on the $30 billion to $40 billion that companies have spent on generative AI. It found that just 5% of AI pilot programs resulted in “rapid revenue acceleration,” while the vast majority of projects have had less impact.

The report spread fast on the heels of OpenAI CEO Sam Altman telling The Verge that the current AI market is a “bubble” full of “overexcited investors.”

AI’s Big Productivity Promise

AI is supposed to boost worker productivity, and thereby corporate profits, by automating tasks like answering customer service calls and replying to emails — ultimately replacing millions of human workers. Morgan Stanley expects AI to create between $13 trillion and $16 trillion in value for the S&P 500, while Anthropic’s CEO predicts AI could replace half of white-collar jobs.

But others are feeling a little more cautious about the scale and immediacy of AI’s impact:

• So far, AI hasn’t had a noticeable impact on unemployment data, even in the most exposed sectors, economist Natasha Sarin said. Surveys about whether AI has supplemented careers like coding to make workers more productive have yielded mixed results.
• MIT economist Daron Acemoglu said he expects AI to expand the US economy by about 1% over the next decade, or a tenth of a percent annually — not nothing, but not revolutionary.

We’re Only Human: Investors are bound to feel a little vertigo looking off the edge of AI. Hype around AI has pushed tech stocks to new records, with the Nasdaq hitting 20 highs this year. This isn’t the first time AI stocks have wobbled. Chinese startup DeepSeek’s claims that its AI model outperformed rival tech while costing less to build became an inflection point that made investors start counting the zeros on AI funding announcements. Investors are also generally feeling cautious right now ahead of Federal Reserve Chair Jerome Powell’s speech this Friday, which they’ll pick apart for rate-cut hints like T. Swift fans ahead of an album release.

Target may have topped expectations, but it hardly hit a bullseye.

In its second-quarter earnings report on Wednesday, the big box retail giant reported sales figures that both beat what Wall Street had penciled in and marked yet another period of year-over-year declines. It’s at least in part a casualty of war — trade war, that is.

At Your Discretion

Target shares are down roughly 50% from a 2021 peak, when the brand’s pivot back toward home goods, fashion, and wellness products coincided nicely with the freewheeling days of post-pandemic euphoria. But the good times, they don’t last. Roughly 50% of Target’s sales come from those very same discretionary spending categories (compared with about 40% for Walmart), which means that in times of waning consumer confidence and likely inflationary tariffs, the classic Tar-zhay sparkle looks a little too bright for most US shoppers.

“People are spending on essentials, but not really discretionary products right now,” R.J. Hottovy, head of analytical research at Placer.ai, told The Daily Upside.

Comparable sales have increased in just three of the past eight quarters, with Wednesday’s report showing a decline of 1.9% as growth in digital eased the effect of a drop at bricks-and-mortar stores open at least a year. A slew of other retail earnings this week offers clues as to where shoppers have headed instead:

• In its own earnings call on Wednesday, TJX — the parent company of TJMaxx, Marshalls, and HomeGoods — reported revenue that beat Wall Street’s expectations as its consolidated comparable sales figures grew 4% year-over-year. Unlike most big box retailers, TJX sources its products through thousands of individual deal-hunting buyers, which Hottovy said allowed it to benefit from tariff-induced supply shocks and cater to bargain-hunting consumers.
• Walmart, which reports later today, saw an increase in foot traffic in its most recent quarter, according to Placer.ai tracking data, marking a rebound from a downturn in the prior quarter. The big box king’s unmatched pricing power has allowed it to weather tariff shocks, while Hottovy says the data indicates the brand is still seeing an increase in higher-income consumers — the type who typically represented Target’s target demographic.

Mr. Inside Hire: Wednesday’s earnings call also brought news of a leadership change at Target. Longtime CEO Brian Cornell is leaving his post (though he will remain as executive chairman), while longtime executive Michael Fiddelke will step into the top spot. Fiddelke, who has risen through the ranks after starting as an intern in 2003, called his experience with the company an asset. Wall Street didn’t necessarily agree. Neil Saunders, managing director at GlobalData, told Reuters that Fiddelke’s hiring does not necessarily “remedy the problems of entrenched groupthink.” Shares of Target fell more than 6% on Wednesday.

For a company that’s looking to turn the corner, hitching a ride with Jeff Bezos isn’t a bad option.

Hertz said Wednesday that its vehicle sales unit will partner with Amazon Autos, the new-ish retail platform for used cars launched by Bezos’ all-consuming e-commerce giant last year. Shares in the Florida-based car rental giant rose nearly 6% Wednesday in a testament to the faith investors have in Amazon’s retail might.

When the Time is Right

Normally, it’s the stars, but fortune, in this case, is when the cars align. And that they did, starting in December 2024, when Amazon launched Amazon Autos to expand the supergiant reach of its retail empire to used and “certified pre-owned” vehicles. Initially limited to Hyundai vehicles as part of a partnership with the automaker, Amazon is now opening up the platform to non-Hyundai models. It already has participating dealers in over 130 US cities to help diversify the offering, and Hertz coming on board will introduce a slate of Ford, Toyota, Chevrolet and Nissan vehicles in one fell swoop. It’s a ready-made road to expansion, one that began immediately in Dallas, Houston, Los Angeles and Seattle on Wednesday, with plans to stretch to all 45 Hertz Car Sales locations in the US.

Hertz, meanwhile, is looking in the rear-view mirror at its pandemic bankruptcy and a failed electric vehicle strategy that followed. The company emerged from bankruptcy in 2021, and executives adopted a turnaround plan last year, dubbed a “Back-to-Basics Roadmap,” that makes improving its fleet management a core component of optimizing revenue and costs. That means refreshing its fleet and selling vehicles before they depreciate into pennies, or a “Buy Right, Hold Right, Sell Right” strategy, as executives have dubbed it:

• In the second quarter, the “Buy Right, Hold Right, Sell Right” approach paid off in some respects: Hertz’s depreciation per unit (DPU) per month of $251 was 16% better than executives’ North Star goal of less than $300. That occurred as Hertz continued a rotation of its rental fleet set to finish by the end of 2025, with older vehicles being sold off and replaced with new models.
• On the other hand, Hertz is very much still in turnaround mode. Citing the combination of high borrowing, approaching debt maturities, softening travel demand and costs related to its remaining older fleet, ratings company Fitch maintained its negative outlook for the rental giant earlier this month. Hertz does have the prominent backing of hedge fund billionaire Bill Ackman, who has argued that US tariffs on auto imports will increase the value of used cars as buyers choose them over jacked-up price tags on new models from abroad.

Flat Tires: Shares in rival used car retailers went into reverse gear following the announcement of Hertz’s Amazon partnership. Avis fell 5.5%, CarMax 2.6% and Carvana 1.6%. At least, if Ackman’s prediction proves correct, they, too, will benefit from more and more prospective buyers paying a visit to the Old Volks home.