Uncertainty Lingers Despite Powerful AI Demand, Northwestern Mutual Says

The powerful surge in artificial intelligence spending is failing to dispel broader market unease, according to Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company. 

In his November 4 weekly market commentary note, Schutte warns that despite blockbuster earnings from key AI players such as Nvidia, investors remain preoccupied with deeper economic questions that have yet to be answered.

With the U.S. government reopening after the longest shutdown in history, Schutte notes that “the big questions that have been hanging over the economy remain,” including the true state of the labour market, the impact of recent Federal Reserve rate cuts and whether tariffs will keep inflation elevated. 

Markets are also still debating whether the Fed will cut rates for a third consecutive time next month.

Schutte highlights a growing divide in consumer behaviour, with higher-income households driving much of the nation’s spending. 

That dynamic, he argues, makes the economy more vulnerable to any stock-market pullback: “Much of their spending [is] supported by equity gains,” he writes, meaning a downturn could ripple quickly through consumption, which drives roughly 70 percent of U.S. GDP.

Concerns about market concentration have also intensified. Although Nvidia’s latest results showed AI chip demand “remains strong,” the brief global tech rally that followed quickly reversed (although the market has been positive since then).

“The rally didn’t last,” Schutte notes, adding that investors increasingly question whether the AI-led advance is sustainable.

Speculative pockets, including cryptocurrencies and unprofitable tech stocks, have already begun correcting sharply, reinforcing fears of overheating. 

Schutte argues that no one can know whether a bubble is forming but stresses that diversification, not speculation, is the surest defence: “Speculation and concentration in any segment of the market may provide large upside potential, but they also introduce large downside risks.

“By contrast, diversification is designed to help investors navigate all the near-term vagaries.”