The recovery does not erase the week of losses
AI-linked stocks recovered part of their losses on Wall Street on Monday, October 19, but the rebound came in an uneven session. The Associated Press reports that the S&P 500 closed up 0.4% and the Nasdaq up 1.1%, while the Dow Jones fell 0.1%. Support came mainly from a few large technology companies; by contrast, most U.S. stocks outside the AI and technology sectors fell.
Nvidia rose 1.4% and contributed significantly to the S&P 500's result, partly because of its weight in the index. In Asia, South Korea's Kospi rose 1.8%, recovering only part of the 14.5% decline recorded the previous week. The picture therefore does not describe a linear return to growth: it shows a market that reacts quickly to expectations and financing costs.
Why the cost of capital matters for AI
Building data centers requires large investments in chips, power, networks and real estate. Some of the financing comes from debt. When bond yields rise, borrowing costs more, and investors may become less willing to pay high valuations for earnings that will arrive in the future. This link helps explain why news about rates and bonds is also reflected in AI stocks.
CoreWeave, which buys accelerators and rents them out via the cloud, has become an example of the sector's volatility: the stock had gone from a gain of more than 7% to an intraday loss and had also lost ground the previous week. The dynamic does not prove that its model is unsustainable, but it highlights how exposed companies that finance computing capacity are to both demand and the cost of capital.
Expected earnings become the next test
The session took place before the quarterly results of companies that invest in or sell AI infrastructure. Investors are looking for signs that spending on chips and data centers is producing sufficient revenue, productivity or margins. The forecasts cited by AP indicated high expectations for earnings growth among S&P 500 companies; high expectations can support prices but make the reaction sharper when results fail to meet them.
A one-day rebound neither confirms nor refutes the existence of a bubble. Reading the cycle requires several quarters of data on orders, data-center utilization, services revenue and returns on investment. Monday's move mainly tells of a pause after the sell-off: the comparison between capital spent and economic value produced remains open.
