Scan the Nasdaq stocks hitting 52-week lows this week and a pattern jumps out: many of the biggest names build, power or rent space for artificial intelligence. Few of these businesses are shrinking. Several reported record revenue in recent weeks, and their shares kept sliding anyway.
The reason has less to do with earnings than with money and politics, and both turned sharply worse over the past month.
Credit Fears Hit the AI Builders First
The first shock came from the bond market. CRWV has taken on more than $51 billion of debt and obligations to build its AI infrastructure, CNBC reported on October 15. By October 21, CNBC said, its shares were down 36% for the month, and the spread on its five-year credit default swaps, a measure of the cost of insuring its debt, had reached 1,145 basis points. Barclays credit analyst Andrew Keches told clients that sentiment toward AI bonds was “decidedly negative.”
Readers weighing the pullback can read our analysis of whether CRWV’s recent drop is a buying opportunity.
More pressure followed. Elon Musk said more than 200 neoclouds, the companies that rent out AI computing power, would see “guppy-level death and consolidation,” CNBC reported on October 26. Two days later, Microsoft reported capital spending below analyst estimates and said some third-party capacity it expected had been delayed, CNBC reported on October 28. Neocloud stocks fell again.
A New Political Risk Arrives in Washington
Then came the election. Reuters reported on November 4 that Wall Street closed sharply higher after Democrats won Congress, but data center shares fell on fears of tighter AI regulation. Democrats made gains in Texas and Georgia, where public opposition to the industry’s rapid expansion has been growing.
The market split in two. Shares of cash-rich AI heavyweights rose, while chipmakers and data center operators fell: Hut 8 lost 23%, IREN 11%, Core Scientific 10% and Applied Digital 6.7%. Citi Research’s head of US equity strategy, Scott Chronert, said any change in the pace of the buildout alters the outlook for many of those suppliers.
We also wrote about how leverage turned an AI bet into a fire sale for one fund.
The pressure carried into the next day. UBS analysts estimated that around 30% of expected US data center capacity additions in 2028 could be at risk from potential construction pauses, Reuters reported on November 5. Large technology companies, by contrast, rose on the view that a slower buildout would curb their own spending, Reuters said.
