AI disruption fears slam new corners of the market, and Google reminds us why we own it

Every weekday, CNBC Investment Club with Jim Cramer publishes Homestretch, an actionable afternoon update just in time for the final hour of trading on Wall Street. Stocks sold off Thursday, while the Dow Jones Industrial Average, S&P 500 and Nasdaq lost more than 1%. Earlier in the session, once the market had settled on more stable footing, we said on the Morning Meeting that we planned to take some profits and raise cash in a market that was starting to look overbought. Of course, shortly after our program ended, the market crashed. Fortunately, we were able to attribute Eaton's and Procter & Gamble's profits to double-digit percentage gains this year. To answer the question of why the market is in sharp decline, there are fears about AI disruption in many industries. It's hitting software, financials, office real estate stocks and even trucking and logistics names again. Artificial intelligence models are getting smarter and more advanced by the day, and investors are choosing to shoot first and sell stocks that may be targeted before they learn how real the risks are. One of the tech stocks that stood out during the broader sell-off was Alphabet. The stock rose Thursday after the company announced what it called a major upgrade to its Gemini 3 Deep Think reasoning model. Google said the latest version of Deep Think can now solve modern science, research and engineering challenges. This is the latest sign that Alphabet has the lead in the ongoing AI frontier model horse race. We made a small purchase of Alphabet this Tuesday and are looking to add weakness again as we mentioned earlier on Thursday. Existing home sales in January fell 8.4% month over month to a seasonally adjusted 3.91 million, the National Association of Realtors said Thursday morning. Sales were 4.4% lower than January 2025. For comparison, sales in December reached a seasonally adjusted 4.35 million, up 5.1% from the previous month; and they increased by 1.4% on an annual basis. At first glance, the January report might seem to dash hopes that the housing market's comeback would lift the fortunes of Home Depot, the club's namesake. But we're not willing to go there yet. For starters, seasonal adjustments meant to smooth out monthly differences in home-buying activity don't compensate for abnormal weather—and if you live anywhere east of the Rockies in the U.S., you know January can be unusually cold. So, although we generally try not to put too much meaning into a single report, the severe cold adds another nuisance; In fact, as the National Association of Realtors' top economist put it. “Below-normal temperatures and above-normal precipitation this January make it more difficult than usual to assess the underlying driver of the decline and determine whether this month's numbers are an aberration,” NAR Chief Economist Lawrence Yun said in a press release. Another reason we shouldn't worry about the January data: Because it measures closed sales, the drop in the 30-year fixed mortgage rate — from 6.19% in December to an average of around 6.1% in January — won't move the needle. We need to see a sustained decline for the trend to bend in Home Depot's direction. We hope President Donald Trump's intervention in the mortgage market will make a difference. Additionally, as Jim Cramer wrote early Thursday morning, the looming shakeup in leadership at the Federal Reserve following intense pressure from Trump on the central bank to lower rates could be another catalyst driving mortgage rates lower. Bottom line, considering we took profits on Home Depot last week and downgraded our rating to a hold-equivalent 2, there's no reason to change our view on the stock in light of the weak January sales data. After the closing bell we will see earnings from Coinbase, Arista Networks, Toast, Expedia, Dutch Bros, Draft Kings, Applied Materials and Pinterest. There are reports from Moderna, Advance Auto Parts and Enbridge ahead of the opening bell on Friday. As for the data, we will see the January CPI report on Friday. (See here for a complete list of stocks in Jim Cramer's Charitable Trust.) When you subscribe to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trading alert before buying or selling a stock in his charitable foundation's portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trading alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH THE DISCLAIMERS. NO CIVIL OBLIGATIONS OR DUTIES EXIST OR SHALL BE RESULTING FROM YOUR RECEIVING ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULT OR PROFIT CAN BE GUARANTEED.