AI stocks bounce back after bruising selloff; CoreWeave jumps on Goldman upgrade
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Oct 19 : AI-linked stocks bounced back on Monday after a bruising selloff last week, as lower Treasury yields and easing crude oil prices offered some relief, while neocloud firm CoreWeave surged following a rating upgrade.
CoreWeave jumped 3.4 per cent after losing more than a quarter of its value last week, when worries over the cloud-computing company’s $50 billion debt load rippled across the AI sector.
Goldman Sachs upgraded CoreWeave to “buy” from “neutral”, saying tight computing capacity and the company’s performance advantage over rival neocloud firms should lift annual recurring revenue per megawatt over the next two years.
The brokerage said it viewed the recent pullback as a buying opportunity.
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The yield on CoreWeave’s bond maturing in 2031 fell 25 basis points to around 15 per cent, easing from more than 16 per cent last week, according to Tradeweb data.
Neocloud rival Nebius Group rose 4.5 per cent after losing more than 31 per cent over the past two weeks. Data-centre operators Applied Digital and IREN climbed 9 per cent and 5.7 per cent, respectively.
The AI trade stumbled last week after a hot inflation reading raised expectations for future interest-rate hikes by the US Federal Reserve, fuelling concerns that heavily indebted AI companies could face higher borrowing costs.
“We believe it is too early to see any meaningful impact from higher rates. Also, we expect AI capex to continue to strengthen into 2027,” said Ohsung Kwon, chief equity strategist at Wells Fargo.
Morgan Stanley expects total AI investment to surge to $1.6 trillion in 2027 and $1.8 trillion in 2028.
The Philadelphia semiconductor index dropped more than 11 per cent last week, with chip stocks among the hardest hit in the AI rout.
The index has shed around $2 trillion in market value during an eight-session losing streak through Friday. It was last up 2.8 per cent, on course to snap its longest losing streak since October 2008.
Intel climbed 5.6 per cent after J.P. Morgan upgraded the stock to “neutral” from “underweight”, saying rising agentic AI workloads and tight supplies of advanced chips could support positive earnings estimate revisions through 2027.
Nvidia added 0.6 per cent, AMD gained 4.3 per cent and Broadcom advanced 2.2 per cent, after all three sold off sharply last week.
Memory-chip maker Micron Technology climbed 3.8 per cent after sliding nearly 15 per cent last week. Data-storage firms Sandisk, Western Digital and Seagate also gained after steep declines last week.
Earnings from megacap technology companies and hyperscalers could provide the next test for the AI trade that powered Wall Street to record highs earlier this year, with investors looking for evidence that earnings growth can offset concerns over valuations, debt and interest rates.
Facebook-parent Meta Platforms and Elon Musk-led Tesla and SpaceX are due to report results later this week.
Semiconductor firms Lam Research and Texas Instruments, along with Western Digital, are also scheduled to report quarterly results.
“The question this quarter isn’t whether AI will continue to grow, it’s whether investors are still willing to pay a premium for that growth,” said Jay Woods, chief market strategist at Freedom Capital Markets.
Source: Reuters
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