Some of the spookiest charts about the markets
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It's natural to be jumpy this time of year, with armies of undead pedestrians hitting the streets Saturday in search of moist human brain — and Skittles.
- To add to the mood, here are some of the charts we've seen recently that have made the hair on our arms stand up.
Why it matters: After weeks of wobbling sideways, the markets seem to be at a crossroads amid real questions about the durability of the AI trade and the economic boom that backs it.
- Were the AI boom to suddenly turn to bust, it could have scary implications for the economy — investment in data centers is supercharging GDP — the markets and the finances of investors.
The big picture: The stock market has become increasingly AI-pilled, with tech stocks and hyperscalers now accounting for more than half the capitalization of the S&P 500. This is higher even than during the dot-com-driven market boom that peaked in early 2000 before the market crashed.
Context: American households are long in the market, as they've never been before.
Zoom in: At the same time, there are real questions emerging about the durability of the AI boom.
- For instance, prices for tokens — the main measure of AI computing power usage — are tumbling. That's not something you typically see in a market where demand is off the charts, which AI insiders claim.
Between the lines: Falling prices don't mean sales won't go up. (If you boost volumes because of lower prices, you can still make more revenue.)
- But it will sure make it harder to generate the revenue to pay off the massive amounts of debt that tech companies have sunk into AI.
- The market is increasingly scrutinizing companies considered the weakest financial links in the AI ecosystem.
Case in point: The corporate bond market sharply repriced the interest rates it thinks CoreWeave should pay in recent weeks, pushing them to nearly 16% at times.
Yes, but: CoreWeave, some might say, is a heavily indebted player unrepresentative of the giant hyperscalers who are really driving the boom.
- That's true. But even the tech behemoths are seeing their borrowing and spending binge start to impinge on their once mighty cash flows.
What to watch: The continuing rush to the capital markets, with Meta and Microsoft announcing multibillion-dollar offerings just this week.
Fun fact: Massive borrowing binges — especially in the bond market — alongside surging asset prices are one of the few phenomena that academics have found to have a bit of predictive power when it comes to market crashes.
The bottom line: We hope these charts don't keep you up at night.
- Nobody knows when — or if — a crash will hit.
- 🎃 Happy Halloween! 👻
