Global equities suffered a broad selloff, led by semiconductors (-11.8%), South Korea (-15.1%) and the Nasdaq-100 (-5.5%). Investors rotated out of crowded technology positions into value stocks and high-quality bonds, while rising energy prices added to inflation concerns. The mood was risk-off, but not outright panic, with gold and the US dollar failing to attract their usual safe-haven demand.
TOP THEMES THIS WEEK
1. AI infrastructure financing faces its first serious credit test
CoreWeave’s bond yields surged towards 15%, reflecting growing concerns about the sustainability of debt-financed AI infrastructure expansion. The key risk is that high borrowing costs and weakening returns could force developers to scale back investment, potentially spreading financial stress to lenders, chipmakers and the broader technology sector.
2. Bond markets may be doing central banks’ tightening for them
US 10-year Treasury yields climbed above 5% amid persistent inflation and energy-price pressures, before retreating as equity markets weakened. Higher borrowing costs could slow economic activity without further central bank rate increases, but stubborn inflation complicates the outlook and limits how far policymakers can ease.
3. Semiconductor leadership comes under pressure
China’s CXMT announced advances in memory-chip technology, triggering sharp losses in Korean chipmakers, even as TSMC forecast strong fourth-quarter revenue and maintained ambitious capital-spending plans. The contrast suggests investors are increasingly questioning technology valuations and future profitability rather than simply assuming that strong AI demand will translate into attractive investment returns.
4. Falling AI prices raise questions about infrastructure returns
Intensifying competition from cheaper AI models and improvements in computing efficiency are driving down the cost of using AI, while smaller models increasingly support processing on local devices. Lower prices could accelerate adoption, but they also raise questions about whether revenue growth will justify the enormous investment in centralised data centres, particularly for heavily indebted operators.
WATCH THIS NEXT WEEK
Semiconductors — whether selling spreads beyond technology.
Semiconductors lost 11.8% this week despite remaining up 63.8% year-to-date, suggesting considerable scope for further profit-taking. The key question is whether the decline stabilises or spreads to broader equities and credit markets. Continued weakness in chip stocks alongside widening corporate credit spreads would suggest a more serious reassessment of AI investment economics, rather than a temporary reversal of crowded positions.
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