đš NASDAQ 100 has now crashed about 6% in the last 10 days
Here is why tech is selling off:
FIRST, INTEREST RATES.
Inflation came in higher than expected this week. CPI was 3.7% and PPI was 6.3%. Markets now think the Fed could raise rates again.
The 10-year yield hit 5.34% this month, the highest since 2007. Even after falling this week, it is still above 5%.
Higher rates make borrowing more expensive. Data centers are built with borrowed money, so they are the first to be hit.
On Wednesday, CoreWeave fell 9.5%, Nebius fell 15.1% and Oracle fell 7.2%. All three rely on borrowed money to build data centers.
SECOND, AI VALUATIONS.
Reuters reports that some investors now see Anthropic's IPO at $1.5 trillion, not $2 trillion.
Anthropic made $16.8 billion in Q3, up 45% from Q2. In Q2, its revenue more than doubled from Q1. That is still strong, but growth is slowing. At this size, investors pay for growth.
When the company leading the AI boom gets a lower valuation, it shows investors are less sure how fast AI revenue will grow.
THIRD, NVIDIA.
It is down more than 10% from its high. The chip index has also fallen 8 days in a row, the longest losing streak since 2008.
So money is getting more expensive, and AI companies now have to show faster growth to justify their prices.
Here is why tech is selling off:
FIRST, INTEREST RATES.
Inflation came in higher than expected this week. CPI was 3.7% and PPI was 6.3%. Markets now think the Fed could raise rates again.
The 10-year yield hit 5.34% this month, the highest since 2007. Even after falling this week, it is still above 5%.
Higher rates make borrowing more expensive. Data centers are built with borrowed money, so they are the first to be hit.
On Wednesday, CoreWeave fell 9.5%, Nebius fell 15.1% and Oracle fell 7.2%. All three rely on borrowed money to build data centers.
SECOND, AI VALUATIONS.
Reuters reports that some investors now see Anthropic's IPO at $1.5 trillion, not $2 trillion.
Anthropic made $16.8 billion in Q3, up 45% from Q2. In Q2, its revenue more than doubled from Q1. That is still strong, but growth is slowing. At this size, investors pay for growth.
When the company leading the AI boom gets a lower valuation, it shows investors are less sure how fast AI revenue will grow.
THIRD, NVIDIA.
It is down more than 10% from its high. The chip index has also fallen 8 days in a row, the longest losing streak since 2008.
So money is getting more expensive, and AI companies now have to show faster growth to justify their prices.