The recent midterm elections have led to fears that Democratic policies may hinder the growth of data centers, which are crucial for AI infrastructure. Peter Boockvar, chief investment officer at One Point BFG Wealth Partners, indicated that the anticipated $1.2 trillion in capital expenditures for next year may not materialize, suggesting a potential end to the current AI trade.
The Nasdaq Composite fell 5% and entered correction territory, while the iShares Semiconductor ETF experienced its largest drop since March 2020. Analysts like Eric Johnston from Cantor Fitzgerald noted that the outlook for AI infrastructure has drastically changed, impacting overall economic growth.
The rise in the 10-year Treasury yield to 4.8% is prompting investors to reconsider their positions in volatile tech stocks. Despite the downturn, some investors believe the AI trade isn't finished but will require more selective investment strategies.
Rob Sechan from Newedge Capital highlighted that while building new capacity is becoming more challenging, existing capacity may become more valuable. There were some positive earnings reports from companies like Motorola Solutions and Sony, indicating pockets of resilience in the tech sector.
Larry Adam from Raymond James suggested that the current selling could represent a buying opportunity for long-term investors, while Victoria Greene from G Squared Private Wealth noted potential support levels in the S&P 500, hinting at a possible market bounce