WS #15894
The release of US CPI data at 3.7% has fundamentally altered the market's view on Federal Reserve policy, effectively ending the soft-landing narrative. This has caused a 2% drop in the Nasdaq-100 and QQQ, as investors sell high-multiple growth stocks that are most sensitive to higher borrowing costs. The selloff is broad-based, affecting semiconductors, nuclear energy, and speculative AI plays, while capital rotates into defensive sectors like consumer staples and utilities. The AI narrative is facing increased scrutiny as CoreWeave's 15% plunge on credit concerns highlights the financial fragility of AI infrastructure builders. Concurrently, rumors of Azure cost cuts at Microsoft, which it has denied, suggest that hyperscalers may be re-evaluating the pace of AI capex in a higher-rate environment. This is creating a divergence between AI software enthusiasm and hardware/infrastructure valuation concerns.
Inflation Selloff and Fed Repricing
The release of US CPI data at 3.7% has fundamentally altered the market's view on Federal Reserve policy, effectively ending the soft-landing narrative. This has caused a 2% drop in the Nasdaq-100 and QQQ, as investors sell high-multiple growth stocks that are most sensitive to higher borrowing costs. The selloff is broad-based, affecting semiconductors, nuclear energy, and speculative AI plays, while capital rotates into defensive sectors like consumer staples and utilities.
The AI narrative is facing increased scrutiny as CoreWeave's 15% plunge on credit concerns highlights the financial fragility of AI infrastructure builders. Concurrently, rumors of Azure cost cuts at Microsoft, which it has denied, suggest that hyperscalers may be re-evaluating the pace of AI capex in a higher-rate environment. This is creating a divergence between AI software enthusiasm and hardware/infrastructure valuation concerns.