James Brodie
Head of Learning & Development, Flux
AI Triggers Selling, Software Risk, Private Equity Dry Spell
AI rout hits software, Mag7, semis; curves flatten, funds sell, jobs weaken, dollar eyed as fear spreads.
AI was meant to lift all boats. Instead, it’s triggering selling everywhere: software on disruption fears, Mag7 on capex fatigue, and semis on expectations of an AI spending slowdown driven by DeepSeek and China.
The result? One theme, three bearish narratives - and no winners. Rather than lifting productivity and valuations, AI is suddenly sinking everything at once.
So, while the Goldman Sachs software at risk basket fell 6% yesterday and is now down 33% year to date. The next penny to drop was IBM, -13%, the stock’s 3rd largest single day drawdown this century (2nd was covid, 1st was dot com bubble), after Anthropic announced that Claude can streamline COBOL code. Meanwhile the Mag 7 stocks are trading at the lowest premium vs. S&P 493 in last 10 years.
AI is now also being seen as deflationary and yield curves are flattening. The US 2s/10s is now trending lower at 58bp from 74bp less than 2 weeks ago. (Chart 1, US 2s/10s yield curve, Bloomberg). Even the Japanese curve is flattening 2s/30s now 2.03bp from 272bp in January.
Oracle is now in its largest drawdown in history; deeper than the decline it saw during the dot-com bubble burst in 2000.
Jamie Dimon says 'watch out’ as high asset prices add to economic risks: ‘My anxiety is high’- CNBC
Goldman: "There Is Zero S&P Call Demand on the Trading Floor"
The S&P 500 now targets key support of 6,775. Only a break above 7,000 to new highs relieves the pressure. (Chart 2, S&P500, Bloomberg)
Hedge funds have sold global stocks at the fastest pace since April, per Goldman Sachs (Chart 3, Goldman Sachs)
The BofA fund manager survey has never been this bearish on the dollar. Time to buy the dollar with interest rate differentials now clearly moving in the dollars favour, particularly versus EUR and GBP. (Chart 4, EURUSD vs 2yr interest rate differentials, Bloomberg). Note – Nvidia earnings tomorrow.
Waller: never seen GDP growth like this without jobs Waller: weak labor market likely to continue going forward. Waller: CEOs say significant job cuts are coming from AI
Yen weakens 1% after report on Takaishi’s rate hike view
The private equity lending situation is now worse than 2008 – Bloomberg
"Private equity's dry spell is now worse than the 2008 crisis," Bain has said.
Number of job vacancies in UK has fallen to a 5-year low. Young people most affected with graduate jobs falling below 10k for the first time ever, down 45% in past year,
US - 42% of recent college grads are underemployed, highest since 2020, per Forbes
US home sellers outnumber buyers by 600,000 — an all-time high.
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