Oct 30 2026 - 2:40pm
Enough sweet talk: show us what you’ve got. That’s the message investors have been sending to the tech companies at the vanguard of the AI revolution: that they’re still willing to hold faith in the promises of the technology’s ostensibly radical potential, but they now want something concrete if they are to keep stumping up their money.
Since hitting a peak of around 26,000 last spring, the tech-heavy Nasdaq stock index has more or less traded sideways. That has sent the overall market into a funk, with the S&P 500 index having barely moved above the 7,500 level it attained last spring.
The AI boom may not have ended, but it has evidently reached a fork in the road. The market is now starting to sort its winners and losers on the basis of who is generating cash flow from their massive investments. Firms that are starting to produce sufficient revenues to substantiate the claim that these investments will pay off are finding their share prices rewarded. Those that are still spending heavily but not yet obtaining proportionate revenue gains are seeing their share prices hammered.
Thus Alphabet, the parent company of Google, saw nearly half a trillion dollars wiped off its market value this week when its earnings disappointed. Other hyperscalers, such as Meta and Amazon, have held up somewhat better but couldn’t help getting caught in the downdraught.
As a result, the fate of the market rally is likely now to hinge on how Anthropic’s Initial Public Offering goes next month. Anthropic is a challenging case to assess. On one hand, it does meet the criterion of rapidly growing its revenues. But on the other, the company is so young that a couple of years’ performance hardly amounts to a track record. When its launch day comes, investors will still be asked to buy the shares largely on trust — the conviction that, one day, the firm really will deliver outsized profits.
A successful IPO will not itself guarantee a new breath of inflow to the AI bubble — after all, the early summer SpaceX IPO was a success, but did little to move a stagnant market. But an IPO which falls short, or which gives rapidly onto a falling share price, could unnerve an already jittery market.
More broadly, investors may be pulling back from the tech trade for the moment. Crypto finished the week in rapid decline after news broke of a hack at Binance. In a market where the risks associated with new technology are suddenly the topic of the day, it’s not surprising that in recent weeks shares in consumer staple firms have done well. That’s often a sign that investors are preparing for a recession and shifting their holdings into bread-and-butter companies.
As a rule, US stock markets rally in the year after a midterm election. We’ll soon see if this year will be any different. But given the exposure of investors to the AI bubble, any serious falls would ricochet quickly around the world.
John Rapley is an author and academic who divides his time between London, Johannesburg and Ottawa. His books include Why Empires Fall: Rome, America and the Future of the West (with Peter Heather, Penguin, 2023) and Twilight of the Money Gods: Economics as a Religion (Simon & Schuster, 2017).
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