Stocks rebounded after a drop caused by concerns about the sustainability of the bet on artificial intelligence that has driven the market bullish.
The S&P 500 ended three days of losses. The sell-off among chipmakers moderated after Jensen Huangchief executive of Nvidia Corp., defended the financial health of CoreWeave Inc., provider of computing capacity for AI, one of its main clients and a company in which Nvidia also invests. This came after a measure of the data center operator’s credit risk hit an all-time high, raising fresh doubts about the AI sector.
Concerns about the viability of CoreWeave have contributed to the recent wave of stock selling, amid fears that the massive expansion of AI infrastructure has advanced faster than the ability of companies to earn returns on their investments.
In a sign of rotation towards other sectors, an equal-weighted version of the S&P 500 – which eliminates the bias of companies with the highest market value – advanced 1.4%. Doubts about the durability of the cycle investment in AI have also intensified debate over whether bonds offer value after a sell-off that pushed yields to multi-year highs.
“There are two important questions. Is the demand for AI real? Yes,” he said Manish Singhof Crossbridge Capital. “Are we going to go back to working and using software like we did before AI? No. The structural opportunity is real, but that doesn’t mean that all the companies that build the infrastructure are going to generate attractive returns for investors.”
Ultimately, the AI revolution will be judged not just by how much computing power we build, but by how profitably we use it, he noted. Singh. Future cash flows must justify the huge current capital commitments, and in the meantime someone must finance that gap, he said.
“AI may be the future. Debt service is still the present,” he concluded. Singh.
Looking ahead, all eyes will be on the comments of the president of the Federal Reserve, Kevin Warshlooking for clues about whether officials are moving from a pause to a hike in rates in October after the latest inflation data, according to Krishna Guhaof evercore.
“In general, we believe that warsh will speak in a way that does not suggest a hike in October,” he said Guha. “warsh will present global tech instability and signs that financing conditions are supporting actions for the most exposed AI companies, in addition to the previous increase in longer-term returns.
The president of the FED will speak late Thursday from New York in Bangkok, where he will participate in an informal conversation with the director of the International Monetary Fund, Kristalina Georgieva.
Some of the main movements in the markets:
Actions
- The S&P 500 was up 0.3% as of 4 p.m. New York time
- The Nasdaq 100 was little changed
- The Dow Jones industrial average advanced 1.1%
- The MSCI World index rose 0.4%
Coins
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro appreciated 0.5% to US$1.1215
- The pound sterling advanced 0.6% to US$ 1.3275
- The Japanese yen strengthened 0.1% to 158.11 per dollar
Cryptocurrencies
- Bitcoin rose 0.7% to US$82,304.06
- Ether advanced 1.5% to US$2,451.22
Bonuses
- The yield on 10-year Treasuries fell 10 basis points to 5.09%
- The yield on 10-year German bonds fell five basis points to 3.41%
- The yield on 10-year British bonds fell five basis points to 5.37%
Raw materials
- West Texas Intermediate crude oil rose 2.8% to US$97.71 a barrel
- Spot gold advanced 1.8% to US$4,177.27 an ounce
