{"id":235879,"date":"2025-12-16T14:59:09","date_gmt":"2025-12-16T14:59:09","guid":{"rendered":"https:\/\/www.europesays.com\/ie\/235879\/"},"modified":"2025-12-16T14:59:09","modified_gmt":"2025-12-16T14:59:09","slug":"stocks-global-selloff-signals-ai-bubble-may-be-ending-in-healthiest-way-possible","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ie\/235879\/","title":{"rendered":"Stocks: Global selloff signals AI bubble may be ending in healthiest way possible"},"content":{"rendered":"

Normally it\u2019s terrible for stock traders when giant tech companies\u2019 shares fall dramatically. Everyone knows that the S&P 500 is dominated by tech stocks\u2014the Magnificent Seven in particular\u2014and their valuations have disproportionate influence over the market as a whole.<\/p>\n

So the news that Oracle<\/a> declined 2.66% yesterday and is now down 44% from its high in September, and that CoreWeave was down 8% yesterday and is down a staggering 60% since its all-time high in July should have rocked markets to their core. Both companies are AI \u201chyperscalers\u201d engaged in the business of building out AI data centers and both\u2014according to traders, at least\u2014have taken on too much debt to fund those facilities.\u00a0<\/p>\n

CoreWeave, for instance, offered a $2.25 billion convertible bond last week that will dilute existing shareholders, according to the Wall Street Journal<\/a>. Previously, in Q3, CoreWeave reported<\/a> $3.7 billion in current debt, $10.3 billion in non-current debt, and $39.1 billion in future lease agreements for data centers. The company expects to make only $5 billion in revenue this year but says it has $56 billion<\/a> in \u201crevenue backlog<\/a>\u201d coming in the future.<\/p>\n

The collapse in market caps of Oracle and CoreWeave is on the scale of the declines we saw in 2000 or 2008. Surely that\u2019s evidence of the AI bubble bursting?<\/p>\n

Well, kinda. The S&P 500 stepped back only 0.16% yesterday. Futures are down 0.4% this morning. The index is still up 16% for the year. Markets in Asia and Europe were broadly down this morning\u2014signaling that some kind of selloff is underway. But it doesn\u2019t look as catastrophic as what\u2019s happening to Oracle and CoreWeave.<\/p>\n

The reality is that investors are selling off individual stocks of companies that seem to be overextended. But they are broadly bullish on stocks as a whole, and certain tech stocks in particular. Tesla<\/a> was up 3.56% yesterday, for instance, and Nvidia<\/a> rose 0.73%.<\/p>\n

As traders flee individual tech stocks, they are buying up non-tech sector companies. The \u201cequal-weight\u201d S&P 500 was up marginally yesterday after hitting a record high on Dec. 11. The equal-weight S&P is up 10.2% year-to-date, compared to the regular, market-cap weighted S&P at 16%.<\/p>\n

\u201cAs the name implies, each index component [of the equal-weight S&P] carries an equal weighting\u2014eliminating the distortion of the mega-cap components and significantly changing sector weightings, including technology, which drops from 33% on the [market-cap weighted] S&P 500 to only 13% on the [equal-weight S&P],\u201d according to Adam Turnquist, chief technical strategist for LPL Financial in Charlotte, N.C.<\/p>\n

\u201cConcerns over AI momentum have recently weighed on technology and communication services, which posted respective losses of 2.3% and 3.2% last week,\u201d Turnquist wrote in a note seen by Fortune. \u201cRotational pressure back into more economically cyclical sectors has been a developing theme, with materials, financials, and industrials notably outperforming.\u201d<\/p>\n

As the Financial Times put it this morning<\/a>, \u201cIf we\u2019re in a bubble, might it end with a slow hiss, not a loud pop?\u201d \u00a0<\/p>\n

Here\u2019s a snapshot of the markets ahead of the opening bell in New York this morning:<\/strong><\/p>\n