Hakyung Kim and Daire Mac Fadden report that Elice, a South Korean data centre builder, debuted on the Kosdaq index yesterday and immediately fell 32 per cent. Before extrapolating on data centre demand, Space X's third-quarter earnings showed strength in the trade, reporting a net profit of $4.4bn and a ninefold increase in AI-linked revenue from a year ago, with the share price rising 5 per cent in after-hours trading.
Musk also announced exploration of a long-expected merger with Tesla. Earlier this year, small caps appeared to have their moment, with the Russell 2000 rallying 22 per cent in the first half of 2026 while the S&P 500 added 10 per cent. However, the rally was short-lived as small-cap indices entered correction territory last week after falling 10 per cent since August 14.
Despite theory suggesting small caps could hedge against the AI trade dominated by large caps, the sell-off persists. The most obvious explanation for the sharp fall is the reversal in interest rate expectations; small caps are notoriously sensitive to higher rates. Even before Federal Reserve chair Kevin Warsh's hawkish Jackson Hole speech in August, markets priced in higher oil prices and higher rate expectations.
Widening credit spreads have added pressure, with Matt Rowe at Man Group noting credit spreads widened in September even when the broader equity market was strong. The rising cost of capital can be existential for small caps, unlike larger companies which can weather such friction. Small-cap defenders highlight the Russell 2000's relative resilience during the dotcom bubble as a way to AI risk-proof portfolios, though irony exists as hyperscaler debt issuance has pushed up borrowing costs.
स्रोत: Financial Times Markets · HeadlinesBriefing द्वारा सारांशित