Crypto’s Long, Hard Fall This Winter

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Model portfolios have evolved from a one size fits all solution. In a recent roundtable conversation, Jeffrey Safe of BlackRock and Alessio De Longis of Invesco break down what's driving the next model moment, discussing how a deeper level of customization is producing a better alignment with investor goals and creating a practice differentiator for financial advisors.

Alex Ossola (0:26)

Bitcoin hits its lowest price in more than a year. What's driving its fall?

Vicky Ge Huang (0:31)

That's the narrative that it's supposed to be, this digital gold, that it would perform better than gold, but the reality is that it just has not acted like a hedge against inflation, and it has underperformed gold.

Alex Ossola (0:44)

Plus, big tech companies like Google and Meta plan to spend billions on AI this year. Investors are having mixed feelings. And the latest batch of Epstein files shakes up UK politics and an elite US law firm. It's Thursday, February 5th. I'm Alex Ossola for The Wall Street Journal. This is the PM Edition of What's News, the top headlines and business stories that move the world today.

Big tech companies are announcing big AI spending plans. Meta said last week that it would spend up to $135 billion on capital expenditures this year. And yesterday, Google Parent Alphabet said it was planning to spend as much as $185 billion, about double last year. Investors have their doubts. WSJ heard on the street columnist Dan Gallagher joins we now with more. Dan, I just laid out these eye-popping numbers for CAPEX spending this year. Is it all going to the building out of AI?

Dan Gallagher (1:42)

Well, most of it is, yes. Especially with Google and what they said on their earnings call is like, yes, the bulk of it goes to essentially the AI infrastructure. A lot of it goes to specifically the chips and the servers to power that.

Alex Ossola (1:57)

Why do these companies feel the need to do this? What is the competitive pressure here?

Dan Gallagher (2:01)

They're in a race to build up AI services, get as much market share, getting users really accustomed to their AI platforms. For Google, they have Gemini. Gemini competes with ChatGBT and Quad and these other kind of AI models. Google wants as many users as it can using Gemini. So they're going to build and invest in that because you need the AI infrastructure to power that and to grow the services.

Alex Ossola (2:29)

So how are investors responding to the announcements of all this spending? I mean, obviously, there's been some investor concern about AI spending overall over the past few months. But as you said, it could be critical to some of these companies' central functions. So what's the verdict there?

Dan Gallagher (2:43)

Honestly, it's mixed because it depends on the day you ask that question. We saw last week when MetaRu announced they put out this really big capex number, this projection, but they also had really strong results. And it was pretty clear AI was helping that business go up. And so you saw the stock go up. With Google, with Alphabet, you're seeing kind of the opposite. The business is still strong. It's like they showed a similar acceleration in their business and they put out a big capex number. But in the market reaction afterwards, everyone's kind of more keen on the capex number. The other difference between the two is meta stock was way down before their earnings report because there was some other concerns about them and Google's has been up a lot. And then you've had this week kind of this general overall worry about AI disruption, what AI could do to all these traditional tech companies. And that feeds into it as well.

Alex Ossola (3:30)

That was WSJ herd on the street columnist Dan Gallagher. Thanks so much, Dan.

Dan Gallagher (3:34)

Thank you for having me.

Alex Ossola (3:35)

Reporting after the bell, Amazon said its sales rose in the most recent quarter. And the company said it expected capital expenditures of $200 billion in 2026, because like its rivals, it's also picking up its spending on AI. For more on Amazon's earnings, visit wsj.com.

The government shutdown delayed the release of the Labor Department's official January jobs report, so it'll be out next week rather than tomorrow. But a bunch of other reports are signaling that the labor market got off to a rough start this year. Some of those are other government reports, like the Labor Department one on job openings. Those fell in December to their lowest level since 2020 Other indicators are gloomy, too. An estimate out today from Revellio Labs, a workforce data company, said the US lost more than 13,000 jobs in January. And Challenger, Gray and Christmas, which tracks layoffs, said companies announced more than 108,000 job cuts last month, the highest level for January in more than a decade. Those concerns about the health of the US labor market, as well as worries about the tech sector, again weighed on stocks today. The three major indexes each fell more than 1%, with the Nasdaq posting the biggest loss and closing down 1.6%, extending its worst route since April's tariff crash. And today, Bitcoin fell below $64,000, trading at its lowest levels since October 2024 That might come as a surprise to some who thought there would be a golden age for crypto under a friendly Trump administration. Bitcoin hit a record high above $126,000 in October. But in the months since, traders seem to have lost their appetite for crypto. For more on what's driving the decline, I'm joined now by journal reporter Vicky Ge Huang. Vicky, in recent months, stocks have hit records and so have safe haven assets like gold and silver. But Bitcoin has been on the decline. What's going on there?