Global stock markets sold off sharply this morning as investors continued to question whether the “Magnificent 7” tech companies have fueled an unsustainable bubble in AI. The selling is brutal. Nasdaq 100 futures were down 0.36% this morning after losing 2.38% yesterday. S&P 500 futures were flat but volatile this morning (the VIX volatility index was up 14% this morning). The S&P 500, which lost 1.56% yesterday, is now down 3% this month, and is down over 5% from its recent high.
Bank of America said it all in a headline on a note this morning: “The bubbly is on ice.”
Nvidia’s blowout earnings call—which came in way above expectations on Wednesday—simply wasn’t good enough to persuade traders on Thursday that AI is overcooked. Yesterday, Nvidia stock rose 5% before closing down 3.15%, an extraordinary reversal of fortune. Overight trading wiped off another 2%. Deutsche Bank called it “a truly remarkable 24 hours, with a sequence of moves that were almost impossible to predict.”
Tech stocks are a bloodbath right now: Palantir lost 5.85% yesterday and is down even more today, premarket. Masayoshi Son’s Softbank Group lost 11% in Japan today.
“Weighing on the stock market is widespread uncertainty about the impact of AI infrastructure spending on the earnings of the AI data center corporations. Nvidia’s strong report didn’t do much to resolve the known unknowns about AI spending,” Ed Yardeni of Yardeni Research told clients. “Also unnerving investors are recent reports that Softbank and Thiel Macro sold all their Nvidia shares. Michael Burry (the ‘Big Short’) continues to raise doubts about the accounting practices of the major AI companies.”
