AI: When Doubt Catches Up to the Markets
Nvidia's spectacular results could have acted as a catalyst for a euphoric year-end in the stock market. However, they were not enough to quell growing nervousness about tech valuations and persistent questions about the long-term profitability of investments in artificial intelligence. Amid rising volatility, sector reevaluation, and mixed signals on the macroeconomic front, markets are suddenly reassessing the strength of the AI narrative.
If Nvidia remains the cornerstone of global stock market performance, its third-quarter results did not dispel concerns. The company reported revenue of $57 billion, a 62% year-over-year increase, significantly surpassing expectations. The guidance rises to $65 billion for the next quarter, proving that demand remains extraordinarily strong, whether from hyperscalers or foundational model designers like OpenAI, Anthropic, or Mistral.
However, the market did not celebrate these figures as usual. The stock fell the following day, dragging down the entire AI complex with it. Investors are now asking: will the tech ecosystem be able to turn the massive data center expenditures into sustainable profitability? Are companies at risk of a sharp demand normalization if the monetization of AI applications doesn't keep pace with the frenetic investment rate? These questions weigh heavily, especially as the multiples reached by tech stocks are at the high end of recent history.
In response to this abrupt narrative shift, volatility surged: the VIX climbed to 26.4, up from just 20 a week earlier. The Nasdaq 100 dropped 3.1%, the S&P 500 nearly 2%, and stocks most exposed to the AI dynamic plummeted sharply, such as AMD (-17.4%), Palantir (-11%), and CoreWeave (-7.4%). Conversely, Alphabet broke away from the trend, buoyed by a $4.3 billion investment from Berkshire Hathaway, highlighting the need for selectivity even within the sector.
A Market Repositioning Amid Macro Risks and Sector Realities
The nervousness sweeping through the markets can also be explained by an ambiguous macroeconomic backdrop. In the United States, job creation is picking up again, but unemployment is rising, complicating central banks’ assessments. Investors see this more as a « dovish » signal, increasing the likelihood of a rate cut in December from 30% to nearly 40%. This interpretation provides short-term reassurance but also reflects an economic environment that's less robust than anticipated, where any slight deterioration in data could reignite concerns.
In Europe, the Euro Stoxx 50 is experiencing a decline similar to that of US indices. The paradox is striking: while signs of easing tensions between Russia and Ukraine could have relieved geopolitical pressure, defense stocks saw significant corrections following the release of a controversial US plan suggesting partial recognition of Moscow's territorial claims. This scenario, deemed unrealistic by European capitals, has revived fears of an uncoordinated peace deal, plunging markets into a state of forced caution.
In this context, two sectors stand out. Durable consumer goods, sensitive to household confidence, are notably suffering. Conversely, healthcare is regaining its traditional role as a safe haven: Roche is up more than 10%, benefiting from regulatory approvals and favorable clinical results. The market seems to be rediscovering its fundamentals: predictable cash flows, long-term visibility, and low correlation with economic cycles.
Recent sessions ultimately show that beyond the AI narrative, investors are reassessing the market's structural drivers. Tech remains powerful but is no longer untouchable. While macroeconomic conditions are uncertain, they are less perilous than in 2022. Sectoral polarization is intensifying, favoring stocks that can justify their valuations through real traction, not just promises.
This content has been automatically translated using artificial intelligence. While we strive for accuracy, some nuances may differ from the original French version.
