A look at the day ahead in European and global markets from Tom Westbrook
The bruising AI selloff extended after the bell, hard into Asia and even lent a bid to beaten-down bond markets.
South Korea's chip-heavy KOSPI has slid more than 15% this week, though it's really data centres in the eye of the storm. [MKTS/GLOB][.KS]
Markets that last year were buyers, seeing pick-and-shovel exposure to the AI boom, are now worried they could buckle under debts before the payoff arrives from leased computer power.
CoreWeave, a loss-making data-centre operator which owes nearly $50 billion according to LSEG data, was at the heart of the wipeout with shares down 15% on Wednesday and another 6% after market, vapourising a fifth of its value.
Yields on its debts due in 2032 shot over 15%, sending a tremor through credit markets.
In a memo, the CEO Mike Intrator said markets can sometimes "misunderstand and act irrationally."
The spectre of trouble in high-yield debt, especially data centres where some of their funding (and fragility) comes from chip vendors, drove investors into Treasuries and sovereign bonds around the world for the first time in a while.
After spiking briefly when US CPI ran hotter than expected, ten-year US government bonds rallied and extended gains through Asia. The long bond dropped nearly 8 basis points, a big move for the timezone, and Fed funds futures surged as short-sellers raced out of the way.
Beneath the shifting sentiment, the revenues flowing chipmakers' way remain enormous and growing. TSMC, the world's largest manufacturer of AI chips, likely reports a sixth straight quarter of record earnings later on Thursday.
ASML, the world's largest maker of tools used to make AI chips, said on Wednesday customers were already looking to place orders for 2029 and 2030, easing concerns that the AI investment boom was losing momentum.
Key developments that could influence markets on Thursday:
- Economics: US retail sales, PPI, British monthly GDP
- IMF meetings in Bangkok
(Editing by Saad Sayeed)
