The Nasdaq fell over 5% as Donald Trump blamed voters for the tech downturn, but the real trigger was investors cutting losses after the US midterms. AI-exposed stocks like Nvidia have dropped more than 20% from their peak. The market weakness signals a shift in the AI build-out, with spending on chips and data centres straining borrowing costs. Neocloud firms, which rent computing capacity, were hit hardest. Chipmakers like Samsung and SK Hynix now trade at single-digit earnings multiples, suggesting growth is slowing. Credit markets show rising default risk for neoclouds like Core Weave, while hyperscalers see falling bond insurance costs. This turmoil marks a more discriminating phase for the AI trade, separating winners from losers.
The political landscape is also changing, with voters in states like Texas and Ohio electing candidates pushing for data centre pauses. This reflects growing resistance to the rapid expansion of AI infrastructure. While the AI trade is not collapsing, the competition to raise capital for chips is cooling, easing pressure on interest rates. Shareholders in major tech firms may even welcome Democrats as an excuse to halt the spending arms race. The market's volatility is likely to continue, but a new, more selective phase is emerging.
Source: Financial Times Companies · Summarized by HeadlinesBriefing