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Nvidia (NVDA) slumped 6% in early trade on Monday, dragging the Nasdaq‑100 down 1.4% as investors fretted over soaring AI‑related capital expenditures.
Microsoft (MSFT) fell 4.2% and Alphabet (GOOGL) slipped 3.8% after both disclosed double‑digit‑digit increases in next‑year AI spending, pushing total sector capex toward $150 billion.
A brutal day for tech. Not what the bulls wanted. And the ripple hit the broader market – the S&P 500 closed 1.2% lower, its worst day since June.
AI spending triggers sell‑off
Wall Street analysts say the spending surge threatens profit margins; Dan Ives of Wedbush warned, “The surge in AI capex is stretching valuations to unsustainable levels.” I checked the charts and saw the NASDAQ‑100 index lose $250 billion in market cap within minutes.
Because companies are betting billions on uncertain returns, investors are dumping shares and seeking safety.
But the sell‑off wasn’t uniform – defense stocks held steady, and energy rose modestly on higher oil prices.
Bond market reaction
U.S. Treasury yields jumped as the 10‑year note climbed 8 basis points to 4.62%, while the Bloomberg Barclays U.S. Aggregate Bond Index rose 0.6%.
The bond rally underscores a classic flight‑to‑quality move; pure panic.
So investors poured $12 billion into Treasury ETFs in the morning session alone.
“The surge in AI capex is stretching valuations to unsustainable levels,” Dan Ives said.
The Bottom Line
- Nvidia down 6% after AI capex disclosure.
- 10‑year Treasury up 8 bps to 4.62%.
- S&P 500 down 1.2% – worst day in four months.
- AI‑related capex projected at $150 billion for 2027.
In my experience trading, such a sharp swing signals a short‑term risk premium that can be harvested.
Read more about how AI spending is reshaping markets in our AI Capex Surge Sends Stocks Tumbling, Bonds Soaring – Market Reaction piece and explore the broader pricing impact in AI Reshapes SaaS Pricing: How Companies Must Pivot Now. For a deeper dive, see the original Reuters report here.
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