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AI financing fears trigger equity rotation, EXANTE finds

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AI financing fears trigger equity rotation, EXANTE finds

Strong corporate earnings are no longer enough to move markets, according to EXANTE’s October equity review. The investment firm describes a growing disconnect between earnings momentum and the capital needed to sustain it, a gap that is reshaping how investors price risk.

On the surface, October looked like a weak month for US equities. The S&P 500 slipped 0.93%, its second consecutive monthly fall. EXANTE points out, however, that the equal-weight version of the index climbed 4.90%, outperforming its cap-weighted counterpart by 583 basis points and recovering most of September’s 4.99% decline. The Russell 2000 edged up, while the Nasdaq recorded its worst month since March 2025.

In EXANTE’s view, this was a rotation rather than a broad retreat from risk. European equities also moved higher, though defensive leadership concealed wide divergence between sectors.

Fundamentals held firm. EXANTE reports blended Q3 earnings growth of 30.2% on revenue growth of 13.4%, with all eleven S&P 500 sectors posting year-on-year gains. Yet the aggregate earnings surprise was only 1.9%, the narrowest since Q4 2022, and the forward price-to-earnings ratio compressed from 19.1x to 18.5x. For EXANTE, this signals that markets had already priced in the good news.

Artificial intelligence sat at the centre of the tension. The debate, EXANTE notes, shifted decisively from demand to financing. By mid-month, credit stress at CoreWeave and Meta’s warning of potentially hundreds of billions in capital requirements fuelled funding concerns. The PHLX Semiconductor Index fell for eight straight sessions, with memory and neocloud stocks hit particularly hard.


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