Analysis: Market Concerns About AI Amplified by Rising US Treasury Yields, Rotation Sell-off in Big Tech Stocks
BlockBeats News, June 23rd. The United States has agreed to provide a 60-day waiver for Iranian oil sanctions, potentially allowing more Iranian crude to re-enter the global market and alleviate supply concerns, causing oil prices to further drop below $80 per barrel. U.S. Vice President Pence stated that there has been "significant progress" in U.S.-Iran negotiations, with Iran agreeing to allow IAEA inspectors to return and oversee its nuclear activities. Despite progress in U.S.-Iran talks, the U.S. stock market remained under pressure, with the S&P 500 and Nasdaq falling, and a rotation sell-off in large-cap tech stocks. Alphabet, Amazon, Meta, and Microsoft saw declines ranging from 2% to 5%, due to concerns related to AI and the rise in U.S. bond yields, which typically do not bode well for growth stock performance.
SpaceX's stock price continued to plummet, dropping 16% on Monday for the third consecutive trading day, with a one-day market cap evaporation of $400 billion. The company recently disclosed holding $100.8 billion in cash shortly after its IPO and announced plans to raise new funds through an unsecured note offering. The bond issuance could reach up to $20 billion, with the earliest launch date being Tuesday.
The market's concerns about AI are primarily focused on the return on investment and valuation pressure. On one hand, capital expenditures by large tech companies on AI data centers, chips, and cloud infrastructure continue to rise, but short-term profit realization remains unclear, leading to market worries that the AI sector may require more time and higher investment to become profitable. On the other hand, the previous sharp increase in AI-related stock prices has led to some valuations already reflecting optimistic expectations. Against the backdrop of rising U.S. bond yields, growth stock valuations are further under pressure. Additionally, intensified AI competition, talent outflow, and large-scale financing by companies such as SpaceX for AI infrastructure expansion have heightened market concerns about cash burn and debt pressure.
Mike Wilson, Chief Investment Officer and Chief U.S. Equity Strategist at Morgan Stanley, stated that liquidity, not interest rate hikes, is the main risk facing the stock market in the near term. The size of the reserve management plan has decreased by about 75% from its peak, while the scale of Treasury repurchases has been reduced by 50%. The acceleration in loan growth has intensified liquidity tightening. He predicts that the U.S. stock market will experience volatility in July and may see a pullback, with the next leg of the profit-driven bull market rally being postponed until the liquidity constraints are removed.
