Chapter 1: What is the main topic discussed in this episode?
Public.com presents The Rundown, your daily market update in under 10 minutes. My name is Zaid Admani, and today is Wednesday, February 4th. In today's episode, we'll tell you why software stocks are getting crushed right now. We'll also recap earnings from Eli Lilly, Nova Nordisk, AMD, and Chipotle.
Then stick around to the end of the show to find out why the market thinks Walmart is now a tech company. We got a great show for you today. Let's go. Stocks took a beating on Tuesday with the S&P 500 dropping 0.8% and the NASDAQ got hit even harder, dropping 1.4%. Now, here's the thing. The sell-off yesterday wasn't evenly spread across the market.
In fact, more than half of the stocks in the S&P were in the green, but the index has still finished in the red because of a brutal sell-off in software stocks. Yesterday, investors wiped out nearly $300 billion in market value across software, data, and financial service stocks.
Chapter 2: Why are software stocks experiencing a sell-off?
And it's because investors are nervous about the AI tools coming out of companies like OpenAI and Anthropic. Anthropic rolled out new automation tools that can handle things like legal research, contract drafting, and data analysis. That's the exact kind of stuff that a lot of these enterprise software companies charge big money for.
So now investors are asking the question, if AI can do these tasks for cheaper and faster, that could eventually impact the business of software companies like Salesforce, Adobe, and others. And it's that anxiety and uncertainty that has the software sector in a bear market right now.
find it kind of ironic that AI went from being the reason the stock market was booming the last couple of years to now being the reason that it's falling. It's a good reminder of how quickly narratives can change in the market. Another good example of this is Google. This time last year, everyone thought that Google was cooked because AI was going to take market share from search volumes.
Now the narrative is that Google is one of the leaders in AI. So I wonder if the same thing happens with these software companies. Like everyone thinks these software companies are cooked. Is it possible we look back in a year and the narrative has shifted again and these software companies end up benefiting from AI? I don't know, we'll have to see.
Personally, I do think the market might be overreacting a bit, but the reality is that we're in this weird phase where nobody really knows which companies will be AI winners and which will be AI victims. And until there's some more clarity, I think we're gonna continue to have more volatility in software stocks. We're going to be staying on top of all this.
Some of these software companies are going to be reporting earnings soon. So it's a great time to get subscribed to the podcast and tuning in every day to stay in the loop. Let's run through some headlines, starting with Eli Lilly and Novo Nordisk. Both pharma giants reported earnings this morning and painted a very different picture.
Let's start with the Danish pharma giant Novo Nordisk, the maker of Ozempic and WeGovie. Its shares are sliding after the company delivered a pretty bleak outlook for 2026. The company warned investors that sales of its weight loss drugs could decline between 5% and 13% in 2026, which is shocking. But there are a few reasons behind the slowdown. First is competition from Eli Lilly.
Their weight loss drugs like Zetbound and Manjaro have overtaken Novo's drugs in the U.S. market. Lilly now controls 60% of the U.S. weight loss drug market compared to Nova Nordisk's 39%. I'll talk more about Eli Lilly's numbers in a bit. The next issue for Nova Nordisk is pricing. Both Eli Lilly and Nova Nordisk struck deals with the Trump administration to slash prices.
Under the agreements, they're selling these drugs to Medicare patients for way cheaper with co-pays as low as $50 a month. Keep in mind, these drugs used to sell for over $1,000 not too long ago. So while the lower prices are great for patients, it's hurting Nova Nordisk's revenue.
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Chapter 3: What impact do new AI tools have on the software industry?
They also reported earnings last night and the stock is getting crushed despite reporting decent numbers. The company beat on both top line and bottom line for Q4. Revenue was up 34% to $10.3 billion, thanks to strong demand from its data center business, which grew nearly 40% year over year. But AMD stock is still down more than 10% this morning because of AMD's underwhelming forecasts.
AMD's revenue forecast for the current quarter is $9.8 billion, which technically is above the average analyst estimate of $9.4 billion. But here's the thing, if you're an AI company right now, you're expected to absolutely blow the doors off of expectations, and AMD didn't do that. And that's why their stock has taken a big hit this morning.
Now, CEO Lisa Su tried to calm everyone down on the earnings call, saying the demand for AMD's next generation AI servers is expected to accelerate in the second half of the year, with big customers like OpenAI and Oracle ramping up deployments. She also said the company has no supply constraints and can meet whatever demand comes their way.
But that wasn't enough to reassure investors, especially with AI stocks now falling out of favor. Let's talk about some stocks making moves today. Shares of Take-Two Interactive are up this morning after the video game publisher raised its full-year outlook and officially confirmed that Grand Theft Auto 6 is launching in November.
The company boosted its net bookings guidance, which is a key metric Wall Street watches because it captures total spending across games, in-app purchases, and subscriptions. The big growth driver right now is reoccurring revenue from games like NBA 2K26, GTA Online, and mobile titles.
In fact, reoccurring revenue made up two-thirds of total bookings last quarter, which is exactly what investors want to see because it's consistent, predictable revenue. As a result, Take-Two stock is up around 6% this morning at the time of this recording. I also think that investors are just happy to hear that GTA 6 wasn't getting delayed again.
Now, on the flip side, Chipotle is getting crushed after reporting another quarter of declining traffic and issuing a pretty uninspiring outlook for 2026. Traffic in Q4 dropped 3.2% and same store sales fell by 2.5%. And if you look at the full year of 2025, same store sales were down 1.7%, marking Chipotle's first annual decline since 2016 when they were dealing with that E. coli outbreak.
And looking ahead, Chipotle expects flat same-store sales growth in 2026, which is not what investors wanted to hear from a company that used to be a consistent growth machine. Now, Chipotle is trying to bring back customers with cheaper options like protein cups for around $4 and tacos at $3.50, but so far it's not moving the needle. And the market is clearly losing its patience.
The stock is down 6% this morning and down more than 30% over the past year. Let's wrap the show with a fun fact. Walmart's market cap crossed over $1 trillion for the first time yesterday, becoming just the 11th U.S. company to ever hit that milestone. Now, what's interesting is that most of the companies in the trillion-dollar club are tech companies.
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