According to The Observer, the decline seemed surprising on its face, especially after positive employment data. Trump commented on this by saying that stocks are supposed to rise after a strong jobs report, not to fall, considering that this has been the usual pattern for 200 years.
But the economic data changed. US inflation rose again, recording 3.8 percent due to the war in Iran, while bond traders were betting that the Federal Reserve would lower interest rates as a result of the weak labor market. However, this hypothesis declined after a jump in the number of vacant jobs amounted to 731 thousand new jobs, which led the market to expect two rate hikes by early 2027.
Before the recent sell-off, lackluster results from chipmaker Broadcom sparked a broader decline in semiconductor stocks. The Philadelphia Semiconductor Index, which tracks the performance of 30 major chip stocks that have risen more than 80 percent this year, fell 10 percent on Friday.
Ross Mayfield, investment strategist at Baird, told CNN that the sharp rise witnessed by many of these stocks cannot continue indefinitely, a sign that the artificial intelligence wave may have entered a more difficult testing phase.
Despite fears that the market is at high levels, the ambitions of major technology companies to raise additional funds to finance data centers have not diminished. Alphabet, which owns Google, announced that it plans to raise $80 billion from stock sales to fund its expansion into artificial intelligence. Meta is also preparing, according to reports, to adopt “creative” financing steps to cover capital spending related to artificial intelligence that may reach $145 billion this year.
This coincided with the markets’ anticipation of a huge initial public offering for Elon Musk’s SpaceX company, worth $75 billion, in addition to two large awaited offerings for Anthropic and OpenAI. Some investors may be selling shares currently to provide liquidity in preparation for these offerings.
This anticipated wave of issuances raises a big question about the markets’ ability to absorb it, as the three offerings combined may be equivalent to more than the entire market value of the London Stock Exchange.
After 9 consecutive weeks of gains for the S&P 500, the correction looks less strange than it initially appeared. The market, which has risen rapidly on the wave of artificial intelligence, now faces a combination of high inflation, new interest expectations, exaggerated valuations, and massive offerings that may withdraw liquidity from existing stocks.
