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Hyperescaler CAPEX spending continues to accelerate.
Funding Fears Threaten AI Bull Market
Early in the year, investors rushed into tech stocks as AI innovations, investment, and rapid growth expectations drew attention away from the rest of the market. AI-related leaders like Bloom Energy ((BE - Free Report) ),SanDisk ((SNDK - Free Report) ) and Advanced Micro Devices ((AMD - Free Report) ) each soared more than 100%. However, over the past few months, Wall Street’s price action has completely flipped. Although major market indices are within a hair of all-time highs, leading AI-stocks have been lackluster, with many down 50% or more off their 2026 highs.
What Caused the Destruction in AI Stocks?
Gravity & Profit Taking
First, while the correction in AI-related names is undoubtedly painful for bulls (especially those who bought near the highs), corrections of this magnitude are normal in bull markets. For example, SanDisk exploded by ~2,800% from August 2025 to June 2026. In other words, after such a massive move, profit taking is to be expected. Currently, SanDisk is testing its rising 200-day moving average, the best gauge of the long-term trend, for the first time in its history. Again, even the strongest stocks occasionally succumb to the laws of gravity.
Image Source: Zacks Investment Research
The AI Debt Fear Narrative
More recently, selling in AI stocks has intensified amid a sharp shift in Wall Street sentiment regarding AI spending and the sustainability of debt loads. The tipping point came when neocloud leader CoreWeave ((CRWV - Free Report) ) saw its unsecured bonds dumped, pushing yields to a distressed 15%. In other words, the move in CoreWeave’s bonds suggests fixed-income investors have far less confidence in the company’s ability to meet its ballooning debt. So far in October, CoreWeave shares have plunged nearly 40%, dragging other neocloud and AI -related stocks like Nebius Group ((NBIS - Free Report) ) along with it.
Image Source: Zacks Investment Research
CoreWeave, which started as a Bitcoin Mining company, pivoted to AI data centers during the 2022 crypto bear market. Today, it is a specialized AI cloud provider that rents out massive clusters of graphics processing units (GPUs) and infrastructure to companies training and running AI models. Building massive AI data centers requires heavy upfront expenses for CoreWeave because its business model demands immediate, large-scale capital spending on infrastructure and hardware before it collects cash from customer contracts.
The Betting Markets Tell a Different Story
I’ve found that betting markets are far more reliable than traditional surveys or opinions because participants have real money at risk. While many headlines suggest a CoreWeave bankruptcy is imminent, the betting markets suggest otherwise. Polymarket bettors assign only an 11% chance of a CoreWeave bankruptcy filing by the end of next year.
Image Source: Zacks Investment Research
Jensen Huang Weighs in on Neocloud Financing Concerns
Jensen Huang is the iconic CEO of the world’s largest company and the most important AI company, NVIDIA ((NVDA - Free Report) ). With that in mind, investors can safely assume Huang has the best sense of what’s going on in the AI industry. At the GTC conference in Berlin, Huang weighed in on the neocloud financing concerns, saying:
"Everything else will get solved when demand is high. You can't solve the absence of demand. But when demand is high, everything else will get taken care of. I am quite confident that they will find solutions. Their solution starts with the fact that they have excellent customers. Demand is really high and they just need working capital, and working capital will come.”
NVIDIA is a CoreWeave partner and stakeholder.
Will AI CAPEX Continue to Grow?
The current AI buildout already the largest industrial buildout in history. Because of massive amount of capital already invested, bears are betting that AI CAPEX spending is near a peak. However, the most recent data shows that Ai spending isn’t slowing; it’s actually increasing at a faster rate. SpaceX’s ((SPCX - Free Report) ) earnings call provided valuable clues. 52% of SpaceX’s revenue are derived from AI.
Meanwhile, during SpaceX’s Q3 2026 earnings call, CEO Elon Musk projected that annual recurring revenue (ARR) could reach $500 billion to $1 trillion by the end of 2027. Meanwhile, Wells Fargo expects Meta’s CAPEX to soar to $249 billion in 2027, up from ~$145 billion in 2026. Goldman Sachs Research now projects that hyperscaler CAPEX will soar from $768 billion in 2026 to $1.182 trillion in 2027.
Image Source: Goldman Sachs Research
Bottom Line
Despite the brutal pullbacks in AI-related stocks, debt fears are far overblown and the bullish fundamental case remains rock-solid for the foreseeable future.
View the Zacks #1 Rank List
Image: Bigstock
The AI Rout: Sorting CAPEX Fact From Fiction
Key Takeaways
Funding Fears Threaten AI Bull Market
Early in the year, investors rushed into tech stocks as AI innovations, investment, and rapid growth expectations drew attention away from the rest of the market. AI-related leaders like Bloom Energy ((BE - Free Report) ), SanDisk ((SNDK - Free Report) ) and Advanced Micro Devices ((AMD - Free Report) ) each soared more than 100%. However, over the past few months, Wall Street’s price action has completely flipped. Although major market indices are within a hair of all-time highs, leading AI-stocks have been lackluster, with many down 50% or more off their 2026 highs.
What Caused the Destruction in AI Stocks?
Gravity & Profit Taking
First, while the correction in AI-related names is undoubtedly painful for bulls (especially those who bought near the highs), corrections of this magnitude are normal in bull markets. For example, SanDisk exploded by ~2,800% from August 2025 to June 2026. In other words, after such a massive move, profit taking is to be expected. Currently, SanDisk is testing its rising 200-day moving average, the best gauge of the long-term trend, for the first time in its history. Again, even the strongest stocks occasionally succumb to the laws of gravity.
Image Source: Zacks Investment Research
The AI Debt Fear Narrative
More recently, selling in AI stocks has intensified amid a sharp shift in Wall Street sentiment regarding AI spending and the sustainability of debt loads. The tipping point came when neocloud leader CoreWeave ((CRWV - Free Report) ) saw its unsecured bonds dumped, pushing yields to a distressed 15%. In other words, the move in CoreWeave’s bonds suggests fixed-income investors have far less confidence in the company’s ability to meet its ballooning debt. So far in October, CoreWeave shares have plunged nearly 40%, dragging other neocloud and AI -related stocks like Nebius Group ((NBIS - Free Report) ) along with it.
Image Source: Zacks Investment Research
CoreWeave, which started as a Bitcoin Mining company, pivoted to AI data centers during the 2022 crypto bear market. Today, it is a specialized AI cloud provider that rents out massive clusters of graphics processing units (GPUs) and infrastructure to companies training and running AI models. Building massive AI data centers requires heavy upfront expenses for CoreWeave because its business model demands immediate, large-scale capital spending on infrastructure and hardware before it collects cash from customer contracts.
The Betting Markets Tell a Different Story
I’ve found that betting markets are far more reliable than traditional surveys or opinions because participants have real money at risk. While many headlines suggest a CoreWeave bankruptcy is imminent, the betting markets suggest otherwise. Polymarket bettors assign only an 11% chance of a CoreWeave bankruptcy filing by the end of next year.
Image Source: Zacks Investment Research
Jensen Huang Weighs in on Neocloud Financing Concerns
Jensen Huang is the iconic CEO of the world’s largest company and the most important AI company, NVIDIA ((NVDA - Free Report) ). With that in mind, investors can safely assume Huang has the best sense of what’s going on in the AI industry. At the GTC conference in Berlin, Huang weighed in on the neocloud financing concerns, saying:
"Everything else will get solved when demand is high. You can't solve the absence of demand. But when demand is high, everything else will get taken care of. I am quite confident that they will find solutions. Their solution starts with the fact that they have excellent customers. Demand is really high and they just need working capital, and working capital will come.”
NVIDIA is a CoreWeave partner and stakeholder.
Will AI CAPEX Continue to Grow?
The current AI buildout already the largest industrial buildout in history. Because of massive amount of capital already invested, bears are betting that AI CAPEX spending is near a peak. However, the most recent data shows that Ai spending isn’t slowing; it’s actually increasing at a faster rate. SpaceX’s ((SPCX - Free Report) ) earnings call provided valuable clues. 52% of SpaceX’s revenue are derived from AI.
Meanwhile, during SpaceX’s Q3 2026 earnings call, CEO Elon Musk projected that annual recurring revenue (ARR) could reach $500 billion to $1 trillion by the end of 2027. Meanwhile, Wells Fargo expects Meta’s CAPEX to soar to $249 billion in 2027, up from ~$145 billion in 2026. Goldman Sachs Research now projects that hyperscaler CAPEX will soar from $768 billion in 2026 to $1.182 trillion in 2027.
Image Source: Goldman Sachs Research
Bottom Line
Despite the brutal pullbacks in AI-related stocks, debt fears are far overblown and the bullish fundamental case remains rock-solid for the foreseeable future.