Tech Pulls in Two Directions as the Warsh Pick Rewrites the Fed Story

Thursday’s session ended lower, but the closing tape was less about the index moves and more about what investors chose to reward or punish. The market leaned toward a stricter standard: clear guidance and believable AI momentum got credit, while anything that hinted at slowing growth or rising costs got marked down. The result was a messy finish where megacaps moved like they were trading in different climates.

Microsoft’s 10% drop on Azure growth concerns was the sharpest shock, and it wiped out $357B in market value in a single session. Meta surged 10% on stronger guidance and a much bigger AI spending plan. Apple delivered a blowout quarter, then still drifted lower as cost concerns, including memory components, pulled attention away from the headline beat. By the close, “tech” was not a single trade. It was a set of narratives being graded in real time.

Now the market has a new anchor point. Trump has announced Kevin Warsh as his pick to replace Powell as Fed chair. That shifts the focus from guessing to pricing: what Warsh signals about the future rate path, how markets should think about Fed independence, and whether this becomes a clean transition or a long confirmation and credibility story. Futures, the dollar, and precious metals already reacted quickly to the news flow, and the next leg likely depends on how investors interpret Warsh’s policy posture once the headlines fade.

Stock of Interest Today: Palantir (PLTR)

Palantir reports earnings on Monday, February 2, after the market close, and expectations are high. The setup described is a beat and raise, with Q4 revenue expected above the Street’s $1.34B and adjusted EPS expected to exceed $0.23. What makes it interesting is the positioning into the print. The stock is down about 20% since the Q3 report, while analyst consensus is described as largely intact. That gap is being framed as a potential opportunity rather than a broken story.

The selloff is attributed to software sector weakness and high beta behavior as AI disruption fears hit parts of enterprise software. The counterpoint is that AI adoption is presented as a tailwind for Palantir’s AIP platform, especially in the U.S. commercial segment. For the stock to re rate, management likely needs to deliver guidance that is meaningfully better than consensus, particularly on U.S. commercial revenue.

Current price: $149.70
Analyst expectation: $200

Five Things to Watch

1) Warsh Is the Pick, Now the Market Prices the Path

The biggest change is psychological. Markets no longer have to price a mystery candidate, they have to price a named one. The immediate questions shift to interpretation and process: does Warsh get viewed as a credibility stabilizer, a policy wildcard, or a channel for lower rate pressure. Even before any formal transition, markets can start moving on expectations alone, especially at the front end of the curve and in dollar sensitive trades.

What to watch next: how rates and the dollar behave once the initial reaction passes, and whether equities treat this as clarity or as a new source of policy risk.

2) Precious Metals: The Unwind Was Fast, the Next Move Is About Conviction

Gold and silver snapped sharply lower as the Warsh news flow strengthened the dollar and triggered profit taking. UBS warned that short term price action had started to look excessive, raising the risk of an interim correction even if the longer term outlook remains constructive. The key point is not just that prices fell, it is that the move looked like positioning getting cleaned up, not a slow reconsideration of the long term thesis.

What to watch next: whether gold and silver stabilize quickly and turn this into a reset, or whether the selling spreads as crowded positioning de leverages further.

3) Big Tech Is Still Not One Trade, and Rates Matter More Now

Thursday’s close reinforced how differently megacaps are being treated.

Microsoft fell 10% on Azure concerns, a confidence shock large enough to spill into broader sentiment. Meta surged 10% on guidance and increased AI spending plans, then softened premarket as investors digested what heavy capex implies. Apple beat on the top line, with revenue up 16% to $143.8B, iPhone revenue up 23% to a record $85.27B, and China sales up 38% to $25.5B, yet still drifted on cost worries.

With a Fed leadership change in view, the discount rate conversation gets louder. Lower rate expectations can help long duration growth multiples, but they do not rescue a growth narrative that is wobbling. Microsoft even has supportive headlines, including a reported $750M Perplexity cloud deal, but the market is clearly focused on the Azure trajectory.

What to watch next: whether the cloud slowdown worry spreads, or stays contained to Microsoft, and whether rate expectations change the way investors pay for growth.

4) AI Memory and Storage Demand Gets a Loud Confirmation

SanDisk surged 19% after a blowout quarter and aggressive guidance. Data center revenue rose 64% quarter over quarter to $440M, and fiscal Q3 guidance of $12 to $14 per share came in far above the Street’s $5.11. That combination signaled both demand strength and pricing power, with AI data center needs framed as a major driver.

Western Digital also beat and guided above consensus, but its shares fell 3.3%. That divergence suggests investors are being selective even inside the same theme, and SanDisk’s surge raised the bar for everyone else.

What to watch next: whether memory and storage follow through broadly, and whether upcoming prints confirm that AI capex is still translating into real orders.

5) Software Beta Pressure Could Flip if Palantir Delivers

Software has been trading with high sensitivity to sentiment. Palantir is positioned as a potential catalyst because it is framed as an AI beneficiary that has still been dragged lower with the sector. If Monday’s results deliver both strong execution and surprising guidance, particularly in U.S. commercial, it could help the market start distinguishing AI winners from names viewed as vulnerable to disruption.

What to watch next: whether a strong Palantir report lifts other AI native software names, or whether the market remains in a mode where every quarter must clear a very high bar.

Bottom Line

Thursday’s close showed a market that is still willing to take risk, but only when the story is clean. Guidance and confidence mattered more than beats, and investors were quick to punish uncertainty. Microsoft’s Azure concerns hit sentiment hard, while Meta and SanDisk benefited from clearer AI demand signals, and Apple proved that even a great quarter can be met with caution when costs enter the conversation.

Now that Warsh is the announced pick, the near term hinge has shifted from guessing to pricing. The market will focus on what his leadership implies for the rate path and the perception of Fed independence, and it will likely keep rewarding clarity while punishing anything that feels unresolved. Palantir’s Monday earnings is a timely test of whether software can regain its footing if an AI aligned name delivers results and guidance that are hard to ignore.

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