It was one of the toughest weeks on the stock market this year, and possibly in several years. It was less about Thursday’s sharp sell-off itself than about the overall moodiness and volatility of the market. The shift from calm to euphoria and then to skepticism was as fast as it was dramatic. Hardly anyone managed to gauge the market’s mood and take advantage of its psychology, which was a reminder that correctly predicting the economy’s direction is simply not enough when it comes to investing.
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AI investment is growing faster than revenue
The latest quarterly results of the largest technology companies revealed that many firms are investing in artificial intelligence at such a pace that their free cash flow is plunging into negative territory. In the third quarter, this was the case for Alphabet, Meta and Amazon, while Microsoft managed to keep its cash flow in positive territory. Many companies are now investing more cash than they can generate from their regular operations.
Just look at Alphabet, which invested USD 51.4 billion over the past quarter, while its operating cash flow was only USD 42.3 billion. This creates a paradoxical situation in which huge demand for memory modules and chips is driving up electronics production costs, which could ultimately weaken consumer demand. The technological revolution that was supposed to bring new sources of revenue is thus beginning to undermine the traditional business of some tech giants.
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The US elections brought only a veryhttps://crypto-globe.com/trump-ztratil-kongres-bitcoin-presto-roste-co-ted-ceka-investory/ brief euphoria
Geopolitics weighed in on this tense situation, as markets initially interpreted the Democrats’ victory in both chambers of Congress and Donald Trump’s defeat as positive news. Uncertainty subsided, and investors welcomed the prospect of a politically divided Washington, which traditionally guarantees less room for radical systemic changes. Another impulse for short-term growth was the hope for an early end to the war in Iran, which had become a political burden and the main culprit behind more expensive energy.
The initial enthusiasm, however, was quickly replaced by reality. Oil prices did fall below USD 100 a barrel, but the war in Iran has not ended and the security risks have not disappeared. Markets also realized that the Democrats plan stricter regulation of data center construction, which dragged down the entire semiconductor sector. The subsequent “Black Thursday” wiped 5.5% off the tech-heavy Nasdaq, and the sell-off swiftly spilled over into cryptocurrencies, led by bitcoin, which lost the USD 80,000 level and is searching in vain for its new bottom.
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Sources:
- TradingView (Market charts and data): https://www.tradingview.com/
- XTB (Investment platform and broker): https://www.xtb.com/
Photo source: Unsplash
