AI chip stocks have just stopped falling. Can the market turn bullish again?
Asian markets saw sharp swings in early trading today. South Korea’s stock market bucked the trend and turned higher, losses in the Nikkei narrowed, and U.S. stock futures rebounded, with Nasdaq 100 futures up about 1.3%. Brent crude fell back to around $108. The market has caught its breath for now, but it’s too soon to say the risk has passed.
I think the key issue in this AI-led pullback is no longer just that chip stocks had risen too far. Investors are starting to ask: When will the hundreds of billions of dollars poured into this sector actually pay off?
CoreWeave is a warning sign.
Bond yields briefly approached 15%, while the cost of credit protection surged, reflecting growing concerns about the highly leveraged AI infrastructure model. Even if AI demand continues to grow, that doesn’t mean every computing-power company will make money. Financing costs, depreciation, and returns on capital may matter more than revenue growth.
This week is a key test.
Netflix reports earnings on Tuesday, followed by Meta and Tesla on Wednesday. The market needs to see more than earnings beating expectations: it needs to know whether AI spending is translating into revenue and profits, and whether management will continue raising capital expenditure.
$NFLX
$META
$TSLA
My view is that there may be opportunities for a short-term oversold bounce, but the rally will likely shift from a broad-based rise to a more selective one. Leaders with strong cash flows and little financing pressure should fare relatively well, while highly leveraged computing-power companies may remain under pressure.
If earnings only show that AI is still burning cash, without demonstrating returns, the rebound could fizzle out again at any moment.
DYOR
Asian markets saw sharp swings in early trading today. South Korea’s stock market bucked the trend and turned higher, losses in the Nikkei narrowed, and U.S. stock futures rebounded, with Nasdaq 100 futures up about 1.3%. Brent crude fell back to around $108. The market has caught its breath for now, but it’s too soon to say the risk has passed.
I think the key issue in this AI-led pullback is no longer just that chip stocks had risen too far. Investors are starting to ask: When will the hundreds of billions of dollars poured into this sector actually pay off?
CoreWeave is a warning sign.
Bond yields briefly approached 15%, while the cost of credit protection surged, reflecting growing concerns about the highly leveraged AI infrastructure model. Even if AI demand continues to grow, that doesn’t mean every computing-power company will make money. Financing costs, depreciation, and returns on capital may matter more than revenue growth.
This week is a key test.
Netflix reports earnings on Tuesday, followed by Meta and Tesla on Wednesday. The market needs to see more than earnings beating expectations: it needs to know whether AI spending is translating into revenue and profits, and whether management will continue raising capital expenditure.
$NFLX
$META
$TSLA
My view is that there may be opportunities for a short-term oversold bounce, but the rally will likely shift from a broad-based rise to a more selective one. Leaders with strong cash flows and little financing pressure should fare relatively well, while highly leveraged computing-power companies may remain under pressure.
If earnings only show that AI is still burning cash, without demonstrating returns, the rebound could fizzle out again at any moment.
DYOR