Markets are churning furiously beneath the surface
AI is prompting investors to reassess every business model under the sun
INVESTORs WAKING from a stupor that began on New Year’s Eve might question whether they had missed anything.
For all the recent geopolitical drama, the S&P 500 share index of big American firms sits almost exactly where it did at the end of 2025: just shy of a record high.
Beneath the surface, however, the churn in America’s financial markets has been furious.
A panic about what artificial intelligence will do to business models has prompted software firms’ stock prices to tumble: they are a third below a recent peak last year.
On February 23rd IBM’s slumped by 13%, owing to vague worries about what AI means for the tech veteran.
It is not just software companies that investors worry will be disrupted by the rise of AI agents and “vibe coding”.
Waves of share-price volatility have rippled through sectors as varied as logistics and commercial real estate.
After a blog post on February 22nd by a research firm imagined a future in which AI produces widespread lay-offs without lifting productivity, the shares fell in some firms it mentioned, such as American Express (in finance) and Door Dash (in food delivery).
So far the losers’ losses have been offset by winners’ gains.
Investors have clamoured for “HALO” stocks (heavy assets, low obsolescence): energy and commodities firms, sturdy utilities and sellers of consumer staples.
Tech companies making the hardware that powers AI have boomed (see chart 1).
The share price of Sandisk, which makes memory chips, has more than doubled this year.
The fragile balance between winners and losers is not guaranteed to hold, since investors still know little about how AI will eventually reshape businesses.
You can gauge the extent of the turmoil in a few ways.
One is to look at the stockmarket’s dispersion—expected differences in movements of individual stocks, measured by the price of options.
It is higher today than it has been for 98% of the time in the past decade (see chart 2).
This measure tends to jump when investors are rapidly pricing in new economic realities.
Usually, that involves the headline equity index soaring or plunging, as when the covid-19 lockdowns began in March 2020 or as tariffs sowed panic last April.
Investors’ reassessment is evident in debt markets, too.
Last summer risky bonds issued by American tech firms yielded some three percentage points more than Treasuries—about the same spread as for “junk” bonds more broadly, regardless of the issuer’s sector.
Today investors are demanding more compensation from tech borrowers.
Their bonds yield five percentage points more than Treasuries—a similar spread to that during the tariff panic (see chart 3).
The rest of the market has barely budged.
The consequences in markets for leveraged loans and private credit, which are heavily exposed to tech and business-services firms, are likely to be more severe.
Matthew Mish of UBS, a bank, thinks defaults on such debt could jump by 2.5 and 4 percentage points, respectively, by late 2026.
If disruption is more severe, the rise in defaults would be twice as large.
Private-credit investors are already taking fright.
Many big funds faced outflows in late 2025.
On February 18th Blue Owl permanently restricted redemptions from its fund for retail investors, to give it time to sell assets.
The share prices of several listed private-investment giants, such as Ares, Blackstone and KKR, have sunk.
It seems unlikely that things will calm down soon.
Novel applications of AI are bound to emerge, so investors will have to continually update their views of which business models will be disrupted and how severely.
And if AI turns out to be far less revolutionary than many now believe, that would hammer the share prices of some of the world’s biggest firms, such as Nvidia.
Roiling markets could in turn hinder the development of AI.
“If losses spike too quickly and to sufficiently high levels in loan markets, the tightening in credit and financial conditions could be severe,” Mr Mish points out.
If firms find it harder to borrow, they will build the infrastructure needed for AI more slowly.
The firms that make the most money from AI could end up being unlisted ones, such as Anthropic or OpenAI.
Moreover, no rule specifies that every losing sector must be perfectly balanced by a winning one.
With investors reassessing every business model under the sun, do not bet on the stockmarket staying calm on the surface either.
0 comments:
Publicar un comentario