𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

Want to bookmark your favourite articles and stories to read or reference later? Start your Independent Membership today.

Join today

Already a member?
Log in

Tech stocks suffered steep drops in the second half of last week, as investors battled more concerns over the cost of AI infrastructure and ongoing global inflation worries.

And London’s primary index, the FTSE 100, fell almost 1 per cent on Monday morning in a tricky start to the final two weeks before the Budget.

Rising inflation makes it more likely central banks will raise interest rates. Getting a higher return on their cash without any risk can make people less likely to take additional risk by investing in shares, which can lead to them pulling money from stock markets.

Meanwhile, while some of the tech giants report enormous revenue and profits as more companies and consumers spend money on artificial intelligence, there are worries over how long the spending will last – and whether the huge fees on data centres, ever-improving chips and supply chains will actually lead to sustained profits in the future.

Here are three things to watch in the coming days in the market and in the lead-up to John Healey’s Budget.

Traders bet against British banks’ share prices

Rumours of a rise in bank surcharge taxes have seen a wave of investors bet that London-listed financial institutions could take a hit to their shares too.

Data from investing platform IG showed a surge of 69 per cent in short-selling activity – in other words, investors speculating that prices will go down rather than up.

NatWest and Lloyds are hardest hit in this regard, whereas HSBC – which has huge operations globally and particularly in Asia – was exempt from this trend, with short-selling decreasing.

Invest at least £100 in Stocks or ETFs of your choice. Get fractional shares worth £50!

Terms and conditions apply.

Go to website

ADVERTISEMENT

Invest at least £100 in Stocks or ETFs of your choice. Get fractional shares worth £50!

Terms and conditions apply.

Go to website

ADVERTISEMENT

Angeline Ong, technical analyst at the firm, said the question now was over “how hard the Chancellor is prepared to hit the sector.”

“If the government goes too far, it risks punishing the very institutions it needs to support lending, investment and economic growth,” Ms Ong added.

CoreWeave and plunging trust

One of the big investor stories last week was CoreWeave, with shares falling more than a quarter (25 per cent) in just the past five days and down more than by more than half (56 per cent) over the last year.

A neocloud company which effectively rents out computing space for AI model training, the company’s debt was a big focus of last week as the repayment rate they’d have to renew further borrowing at shot higher.

The company, and some analysts, insist it’s not much of an issue – but comment on social media from Elon Musk (well, one word, “yikes”) and wider concerns over a potential AI “bubble” meant investors stampeded for the exit.

It’s up around 2.5 per cent in pre-trading before US markets open on Monday, but remains well down on the prices of even six months ago – despite Nvidia’s CEO Jensen Huang having “justified his company’s investment” in the firm, said Susannah Streeter, investment strategist at Wealth Club.

Tech giants reporting latest profits

Finally, among the big names in tech seeing falling share prices last week were Dell, down more than 22 per cent, and Intel, down around 15 per cent.

But this week the focus will be on some huge companies with big expectations on their numbers as they report their latest financials.

“Investors will be kept busy this week with updates from ‘Magnificent Seven’ members Tesla and Netflix, while elsewhere companies such as Ford, General Motors, American Express, IBM and AT&T will report amid another important week where expectations are high,” said interactive investors’ head of markets, Richard Hunter.

Kathleen Brooks, research director at XTB, added that previous dips in certain stocks this year so far have proven opportunities to buy at lower prices – and the same could yet be true again.

“Although volatility spiked last week, the recent bumps in the road for the AI trade have been short lived,” she sad. “Could signs of robust capex spending at Meta and Tesla rejuvenate the chip trade? Valuations fell sharply last week, and we think any sign that revenue growth for the chip makers like SanDisk, Micron, AMD, Nvidia etc. will continue to expand in the coming months could be used as a buying opportunity.”