By Lucy Raitano
LONDON, Feb 6 (Reuters) – The global AI trade is starting to fracture as soaring capex, rising debt loads and doubts over who will profit from the technology force investors to draw sharper lines. Markets are now splitting across stocks, sectors and even regions.
When ChatGPT launched in November 2022, anything linked to the artificial intelligence theme surged – from chipmakers and software firms to raw-materials suppliers and even companies most exposed to AI disruption.
That lifted equity and debt markets to levels that have drawn bubble warnings from regulators and investors, even as the likes of Microsoft, Amazon, Apple and Meta mapped out hundreds of billions of dollars in spending.
This week’s market turmoil suggests the trade is hitting a turning point as investors weigh the promised AI payoff against its rapidly rising cost.
Here are four charts that show how the AI trade is mutating.
1) PICKS ‘N SHOVELS OUTPERFORM
This week’s rout in software stocks has widened the gap between AI “picks ‘n shovels” – hardware makers powering the AI data centre build-out – and firms further down the supply chain.
In the U.S., ServiceNow and Salesforce have dropped 12% and 9% respectively this week. In Europe, data and analytics firms RELX and London Stock Exchange Group are down 16.4% and 6.3%.
The reversal is stark. Software, data and analytics groups were initially seen as AI beneficiaries, with hopes generative AI would bolster products and profits.
Semiconductor and data-centre-exposed shares have also fallen this week, but far less, extending a gap already widening between enablers and potential casualties of AI.
“This divergence is not a vote against AI. It is a signal that investors are differentiating between who enables AI and who may be disrupted by it,” Charu Chanana, chief investment strategist at Saxo, wrote in a note.
Barclays equity strategists said on Wednesday the same pattern was showing up across Europe, calling dispersion in the region’s AI trade “extreme”.
2) MAGNIFICENT 7 NO LONGER MOVING AS ONE
The once-unified Magnificent 7 group of most valuable U.S. stocks is also diverging, as investors move from rewarding big capex announcements to scrutinising the return on that spending.
Portfolio managers at Goldman Sachs Asset Management flagged in January that diverging AI and cloud strategies were breaking apart the Magnificent 7 narrative.
That has come into sharp focus. Microsoft and Meta both reported higher capex, yet Microsoft shares fell 10.4% on January 29 while Meta rose 10%.
