AI capex doubts collided with an oil shock and European debt stress this week — a reminder that the "long AI, short everything else" trade is unwinding fast.
Researchers highlighted a sharp risk-off move in tech after Meta's results, with the Nasdaq posting its worst session since June, semis down nearly 6% on the day, and hyperscaler CDS spreads jumping (Oracle 314bps, CoreWeave above 1100bps). The concern: how much is being spent on AI infrastructure, how it's financed, and whether returns justify it. Treasuries caught a flight-to-quality bid, with the US 10-year briefly back below 5%.
Oil was the other story. Brent pushed toward $117 on Houthi strikes against Saudi Arabia and speculation of post-midterm US action against Iran — well above fundamental fair-value estimates near $94, per one modeling exercise.
In Europe, French OAT-Bund spreads blew out past 170bp on fiscal and political strain, with the 10-year briefly topping the US. Analysts expect verbal ECB intervention before anything more activist.
Big central bank week ahead: Fed, BoC, ECB, BoJ and RBNZ all on deck.