18.02.26 - AI concerns
Last week, the first attempted rebound on Wall Street failed, with mounting concerns around profit sustainability in the tech sector. What started with AI disruption fears in software names spilled over into other segments, including wealth managers, media/publishers and transport companies.
Two key factors continue to weigh on markets, especially the tech sector:
Rising AI-related Capex:
Big Tech’s aggressive investment plans in AI are increasingly questioned by investors, with concerns around capital discipline and uncertain returns.
Broad disruption fears
AI is no longer just a pure growth story — it is increasingly perceived as a disruptive force across multiple industries. This is putting pressure not only on selected tech names but also on adjacent sectors, as investors reassess business models, competitive advantages and long-term earnings visibility.
With tech sector under pressure the Magnificent 7 (Apple, Microsoft, Nvidia, Alphabet (Google), Amazon, Meta, Tesla) underperform the rest of the market.
Markets: rebound in equities and commodities
Equities: Broad rebound, led by Tech; Nasdaq +1.3%
Bonds: Yields slightly higher (US 10y ~4.09%, Japan 10y ~2.14%)
Currencies: USD stabilizes after recent weakness; CHF remains strong
Commodities: Strong rebound — gold back above USD 5’000/oz (+2.5%), silver above USD 78/oz (+6%)
Cryptos: No recovery; Bitcoin remains below USD 68k
Volatility: VIX trending higher again, staying above 20 despite the rebound
My View: Current market volatility, reflected in larger price swings, does not come as a surprise. Today’s rebound may prove short-lived, as uncertainty remains elevated. AI-related concerns are unlikely to fade quickly, especially with valuations in parts of the tech sector still extremely demanding.
The classic “buy-the-dip” playbook is losing reliability. Many speculators who were rewarded for this strategy in the past are now facing a different market regime, which is likely to limit fresh risk-taking on rebounds.
The underperformance of the Magnificent 7 (Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta and Tesla) also has a technical component: ETF-driven flows amplified gains during the rally — and now, as positions are being reduced, these heavyweight stocks are coming under over proportionate pressure. This mechanical selling can reinforce downside moves even without a major fundamental shift.
Bottom line:
Headline-driven markets, stretched positioning and rising volatility argue for caution. Tactical rebounds may occur, but the environment remains prone to renewed setbacks — especially in crowded tech and AI trades.
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