Benzinga Bulls And Bears: Nvidia, CoreWeave, Oklo — And AI-Linked Stocks Keep Falling
News Summary
This week, Wall Street stumbled as AI-linked stocks, led by Nvidia and Palantir, faced heavy selling despite strong earnings. Concerns grew that the AI boom may have run "too far, too fast," with investor Michael Burry reportedly opening short positions against Nvidia and Palantir. The Roundhill Magnificent Seven ETF fell 3.8%, the Invesco QQQ Trust dropped nearly 5%, and the iShares Semiconductor ETF plunged 7%. Market breadth narrowed further, with traders rotating defensively into energy and healthcare. On the bullish side, Bank of America reaffirmed a "Buy" rating for Nvidia, projecting 70% earnings growth in 2026; CoreWeave beat Q3 estimates with its revenue backlog nearly doubling; and Virgin Galactic shares rallied on Q3 results and progress on its Delta-class spaceplanes. On the bearish side, Oklo reported a wider-than-expected Q3 loss; Rigetti Computing missed Q3 revenue and warned of years until meaningful commercial revenue; and USA Rare Earth posted a significantly wider Q3 loss. Tesla's China deliveries hit a three-year low, with a potential first full-year decline in 2025.
Background
In 2025, global markets continue to monitor inflation prints and central bank commentary to determine whether monetary tightening cycles in major economies will deepen or pivot. Against this backdrop, technology stocks, particularly those linked to Artificial Intelligence (AI), have experienced unprecedented valuation surges, though concerns over their sustainability have grown. The "Magnificent Seven" tech giants, including Apple, Microsoft, Nvidia, and Tesla, have been primary drivers of market gains over the past year, with their performance significantly impacting key indices. Fluctuations in market sentiment, especially within high-growth sectors, often trigger rotations from risk assets towards safer, defensive industries.
In-Depth AI Insights
Does the recent sell-off in AI-linked stocks signal the end of the bull run or a healthy consolidation? The depth of the AI sector sell-off, despite strong corporate earnings (QQQ down nearly 5%, SOXX plunged 7%), suggests more than mere profit-taking. Short positions by notable investors like Michael Burry, coupled with "overheated" concerns, are forcing a market re-evaluation of risk. However, the robust order visibility and growth projections for companies like Nvidia and CoreWeave indicate that underlying demand for AI infrastructure remains strong. This could be a necessary valuation reset rather than a deterioration of fundamentals, potentially offering more attractive entry points for long-term investors. Does the rotation into defensive sectors foreshadow a broader market downturn, or is it simply risk aversion in specific high-growth areas? The rotation of capital into defensive sectors like energy and healthcare is classic risk-off behavior. It reflects investor apprehension about potential contagion from an AI valuation bubble burst, as well as hedging against macroeconomic uncertainties. However, given the ongoing focus on core inflation and central bank policies, this rotation might be more indicative of a cautious market outlook for the latter half of 2025 rather than a direct harbinger of a full-blown recession. Capital is seeking stability and cash flow over pure growth. How might the Trump administration's economic policies (in 2025) influence market risk appetite for high-growth tech stocks, particularly in AI? The Trump administration's inclination towards stimulating economic growth through tax cuts and deregulation typically favors corporate earnings and the stock market. However, its "America First" trade policies could ignite international trade tensions, thereby increasing global supply chain uncertainties and potentially impacting tech companies reliant on global operations. Furthermore, if the administration prioritizes the revitalization of traditional industries, it might, to some extent, crowd out tech innovation in terms of fiscal incentives and policy focus. This could indirectly affect investor risk appetite for high-growth tech stocks, encouraging capital flows into more politically favored sectors like domestic manufacturing or energy.