🔥 While the "fires" remain localized for now, Bank of America is already mapping out what the end of the AI rush might look like. Two major market warnings in a single week are definitely not a coincidence.
📉 The Revenue Shock
Last Thursday gave us a near-repeat of the "DeepSeek moment." As soon as the FT reported that OpenAI's annual revenue was around $50 billion (a massive $20 billion short of expectations), the Nasdaq slipped by 1.4%, and chipmakers dropped 3.4%. Notably, bond yields fell right alongside equities, reversing the market's previous trading pattern.
💸 The Debt Domino Effect
Yesterday, the scenario repeated itself—this time driven by debt concerns. CoreWeave ($CRWVB ) plummeted 15%, struggling with a flawed model of borrowing at 9% while earning only about 1% on its investments. The credit market now prices in a 63% probability of the company defaulting within 5 years. This triggered a tech sell-off: DigitalOcean (DOCN) dropped 14%, Nebius ($NBISB ) fell 9%, Oracle ($ORCLB ) lost 9%, and the Nasdaq shed another 2%.
🛡️ Market Risks & Safe Havens
As AI disillusionment hits the Nasdaq the hardest, bonds are predictably becoming a protective asset once again.
The Good News: Overheated stocks are still isolated. There are only 13 of them in the S&P 500 (just 2.4% of the index, a far cry from the 20-40% seen at the peak of the dot-com bubble).
The Bad News: The current market calm is artificial, temporarily sustained by market-maker hedges. If the S&P 500 drops below 7,700 points, this protective cushion will thin out, potentially triggering a self-accelerating market crash.
