If the AI Bubble Bursts, These Stocks Will Be Winners
Yahoo Finance ·
Jitters about the AI trade are spreading across the market again. CoreWeave has plunged in recent weeks, reaching its lowest level since shortly after its IPO, after its bond yields jumped to as high as 15%. The Nasdaq Composite plunged 2.6% on Thursday, hitting its lowest level in more than a month. Meta Platforms tumbled 7% in spite of a strong earnings report as investors were spooked by its first quarter of negative free cash flow in its history, reflecting the surge in spending on AI infrastructure capital expenditures. While there's no sign of demand issues in AI, investors are clearly skeptical that companies like Meta and CoreWeave will see a return on investment, especially as interest rates have surged. However, something surprising has happened with interest rates over the past couple of weeks. After investors bid them up on concerns about inflation, the war in Iran, AI spending, and new Fed chief Kevin Warsh's promise to raise the benchmark Fed funds rate, treasury yields have started to come down. The benchmark 10-year yield fell by 3.8% to 4.95%, its first time below 5% in a month, and it's down by 7% over the last two weeks. That could reflect a rotation out of stocks into bonds to take advantage of high yields, and worries about a sell-off in AI stocks are likely to accelerate that shift.
DYAX Investor Sentiment
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