The Market Has Stopped Believing in AI Spending | Weekend Intelligence #37
A week that was unkind to tech stocks. Doubts about the pace of investment in artificial intelligence dragged semiconductor stocks lower, led by Nvidia, while Apple delivered a record quarter and its shares still ended roughly where they started. Meanwhile, energy-driven inflation came back into focus in Europe, and the ECB faces an uncomfortable choice as the question of who will succeed its president comes into play.
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Key points
Why the Nasdaq 100 shed $2.3 trillion in a single Thursday—and what it says about the AI trade
What drove Nvidia down 9.3% before it even reported its quarterly results
Why eurozone inflation jumped to 4% and how difficult a position that puts the ECB in
How Apple reported record revenue, yet its shares fell the following day
What to expect from Tuesday’s US inflation report and Thursday’s results from Cisco and Applied Materials
Nvidia −9.3% and the Nasdaq 100 in correction territory: the AI trade shed $2.3 trillion
On Thursday, November 5, Nvidia closed at $181.60, down 9.3%, and lost 11.3% over the week as a whole. According to Yahoo Finance, the Nasdaq 100 shed 6.3% and $2.3 trillion in market value that day, the S&P 500 fell 4%, and the Dow dropped 1,800 points. The semiconductor index SOX lost 12%. Nvidia has yet to report its quarterly results.
The trigger was not company data, but politics and the cost of money. According to Reuters, concerns about tougher AI regulation and oversight of data-center expansion after Democrats’ victories in congressional elections weighed on chipmakers, compounded by high borrowing costs. The Nasdaq 100 entered correction territory as early as November 2, when it fell to 27,989.82 points, more than 10% below its October 6 peak.
The second pressure point is demand financing. According to Bloomberg, Microsoft is backing away from commitments to so-called neocloud operators because of delays and rising costs—it did not exercise an option that would have more than doubled its contract with Nscale in Texas. These highly indebted operators are among the marginal buyers of accelerators; when their contracted revenue shrinks, so does their ability to place orders.
Order books, however, tell a different story from the market. Alibaba, Tencent, and ByteDance ordered around 6 million RTX Pro 5500 chips for about $70 billion, but according to Bloomberg, they will receive only tens of thousands of units over four months—around 1% of the volume. Demand is not the problem; the question is how much of it can make it through production and when it will turn into revenue.
The Nasdaq 100 is going through its third correction this year and, despite the decline, remains up 11% year to date. Nvidia’s November 5 drop was its steepest one-day fall since April 2025. The share price has returned to its weakest level since April this year, or roughly 23–25 times expected earnings—a range that, for a company with net income of $59.7 billion, is not an extreme valuation but an extreme test of confidence.
Regulatory pressure is also mounting around Nvidia. On November 4, Republican chairs of three House committees requested a closed-door briefing from Jensen Huang on the alleged China ties case, setting November 18 as the deadline. The company has simultaneously tightened tracking of accelerators in Southeast Asia to prevent chip smuggling into China. Micron also points to supply-chain strain: it has paused construction of a $4.5 billion plant in Taiwan.
The nearest test is Nvidia’s November 17 earnings report. The key question is whether its outlook confirms its existing position—that supply, not weakening demand, is the constraint—and what it says about converting orders into deliveries.
The second signal is the behavior of debt-funded buyers: further pullbacks by hyperscalers from neocloud contracts would shift the debate from valuations to the actual volume of investment. The third is the new Congress’s regulatory agenda for data centers.
Eurozone inflation at 4%: energy up 20.8% and the ECB has no comfortable option
On November 4, Eurostat published its flash estimate for October: eurozone inflation was 4.0%, compared with 3.8% in September and 2.1% a year earlier. That is the highest reading since September 2023. The entire increase is driven by one item—energy prices rose 20.8% year over year, after 18.9% in September. Full October data will be released on November 18.