AI infrastructure stocks lose $4.2T as debt and valuation fears grow
The AI infrastructure boom is losing momentum as investors reassess valuations, debt exposure and the economics of massive data-center spending. A $4.2 trillion market-value wipeout shows how quickly confidence has shifted, even as underlying demand remains strong.
Data centre stocks erase nearly half of their previous rally
As per Financial Times, manufacturing, energy, and industrial firms involved in the building of data centers have seen about $4.2 trillion wiped out of their market capitalization since June. The selloff has erased nearly half of the $9.4 trillion rally accumulated over the previous 12 months.
Caterpillar is one of the worst affected firms, with its market capitalization being slashed by $214 billion or 44% from its June high. Oklo, a nuclear technology developer, is down 49%. Comfort Systems and Corning are each down by about half their market capitalization.
Debt concerns and high valuations fuel the correction
The selloff has been driven largely by concerns over stretched valuations among companies supplying AI infrastructure and the sector’s growing reliance on debt financing.
Reuters reported that banks and credit investors have become more cautious about funding AI projects following the recent decline in technology stocks. Potential restrictions on new data-center construction in the U.S. add another layer of risk, as they could delay or scale back major investment programs.
Strong demand contrasts with weakening investor confidence
Despite the market correction, underlying industry activity remains robust. U.S. data-center construction spending reached $96 billion in the 12 months through September, while Caterpillar’s order backlog climbed to a record $78 billion.
Caterpillar also reported a 17% increase in quarterly revenue to $20.7 billion. Analysts caution, however, that strong order books do not necessarily guarantee continued growth, as part of the demand may reflect duplicate equipment orders placed amid constrained manufacturing capacity.
AI sector losses highlight broader financing risks
The selloff suggests investors are increasingly judging AI-related companies not only on potential demand growth, but also on whether massive investment programs can generate adequate returns. High debt exposure and uncertainty over future profitability could continue to weigh on the sector.
Traders Union previously reported on another wave of selling across AI stocks that hit both chipmakers and cloud-infrastructure operators. CoreWeave and Nebius fell 10.8% and 12.1%, respectively, adding to concerns over AI-project financing and the durability of the investment boom.
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