The question of how AI investments will translate into company revenues is heightening pressure on technology stocks in global markets. Despite semiconductor producers’ record profits and banks’ growing transaction revenues, rising interest rates, costly data center investments, and finance costs are prompting investors to reassess the sector’s sustainability.
Technology Indexes Fall as Interest Rates Increase
On Friday, the Nasdaq Composite fell by 2.15%, the Nasdaq 100 by 2.5%, and the S&P 500 by 1.1%. The Nasdaq’s weekly loss reached 4.48%, while the Dow Jones rose by 0.68% in the same period. The performance gap between the two indexes surged to its highest level since July 2002. Meanwhile, the Philadelphia Semiconductor Index marked its longest losing streak since 2008, falling for an eighth consecutive trading day.
U.S. bond interest rates, along with rising dollar and oil prices, are significantly tightening financial conditions. Morgan Stanley’s Chief Equity Strategist, Mike Wilson, observes that this situation mimics the impact of a Federal Reserve rate hike, though pressure is predominantly felt across the market rather than by the handful of large tech firms that prop up the indexes.
“The median share price of S&P 500 companies is about 15% below its 52-week peak. This represents one of the weakest performances since the dot-com bubble burst. The S&P 500 Equal Weight Index has also lagged the market capitalization-weighted index by about 6% over the past six months. A negative equity risk premium suggests that equities are losing their valuation appeal compared to U.S. bonds,” stated Wilson.
AI Spending and Financing Under Strain
Wilson contends that the current pressure is primarily due to valuation contraction and hasn’t yet evolved into a pronounced economic growth risk. With strong nominal growth and robust corporate profits, elevated real interest rates could further pressure valuations. Goldman Sachs warns that the lifting of sales restrictions might increase stock availability by 2027.
The stabilization of financial stocks and reduced volatility in U.S. Treasury bonds are critical for market direction in the coming period. It remains to be seen whether lagging stocks will rise to match the tech giants or if the latter will decline, dragging indexes into broader market weakness.
In a social media post, Donald Trump highlighted the S&P 500’s rise from 5,881 points in December 2024 to 7,651 points in September 2026, emphasizing a roughly 30% increase. Nevertheless, recent sell-offs have rekindled concerns about AI investment returns and the broader impact of rising oil prices on markets.
A similar divergence is observed on the finance side. According to Crisil and Coalition Greenwich, global banks’ AI-linked transactions are expected to generate investment banking fees of $8.5 billion this year, up from $3.5 billion last year. These revenues include advisory fees for mergers and acquisitions, as well as bond and equity issuance.
In contrast, banks are becoming more selective about financing data centers. Goldman Sachs CEO David Solomon points out the uncertainty surrounding the capital and processing power that the AI ecosystem will demand. Morgan Stanley similarly states it will avoid transactions that relax credit standards and remain selective in the risks it assumes.
Semiconductor Sector Faces Growth and Cyclicality Concerns
AI demand continues to fuel robust growth in the semiconductor sector. Global chip sales growth in the first half of 2026 reached its highest pace since the 1980s. TSMC posted six consecutive quarters of record profits, while Samsung Electronics recorded four. Despite this, a 14% decline in the Philadelphia Semiconductor Index since October 6 has heightened investor concerns over the sector’s cyclical nature.
Manufacturers are bolstered by limited supplier numbers, strong cash flows, and long-term contracts. TSMC’s capital expenditures, projected to be around $62 billion this year, could rise to $76 billion next year, primarily financed by cash from operations.
Manufacturers are also transferring some demand risks to customers. NVIDIA has committed over $250 billion for chip and component supplies through January 2029. Micron has “take or pay” contracts totaling $32 billion through 2030, requiring payment even if products aren’t used.
While long-term orders and prepayments safeguard manufacturers, a sharp demand drop and investment decrease could pressure chip prices, corporate profits, and high-valuation stocks. In such a scenario, customers might bear some costs.
Price fluctuations in computational power are paving the way for a new financial market. According to Bloomberg, firms like Jump Trading and DRW are expanding activities into computational power derivatives that hedge against GPU rental price changes.
Jump plans to form a dedicated trading team to assume risk using its own balance sheet and provide market-making services for products developed by firms like CME and Silicon Data. The company is also tracking related products from ICE and Ornn. DRW aims to participate in this market with three teams, having invested in Silicon Data and Ornn. CME’s respective futures products are pending regulatory approval.
