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AI trade rout: Are global financial markets showing signs of a bigger crisis?

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AI trade rout: Are global financial markets showing signs of a bigger crisis?

A rout in technology stocks as confidence in the AI trade falters could test the resilience of global financial markets from New York to Taipei.

The tech-heavy Nasdaq 100 rose nearly 2% on Friday, clawing back some of Thursday’s more than 6% plunge – but traders remain on edge.

Policymakers have long warned of the risks from an AI boom unraveling. Investors and regulators are keeping a close watch on market stress indicators, with some flashing amber, although not yet red.

Wall Street’s fear gauge, the VIX index of US stock market volatility, rose to over 28 on Thursday, its highest since late March. It was holding close to that level on Friday.

The increase is relatively contained compared to the post-April 2025 “Liberation Day” market jump and the August 2024 market selloff.

“It’s still early days,” said Idanna Appio, a portfolio manager at First Eagle Investments. “My concern would be if we see more spikes in volatility, more stress, real issues with the ability to access markets. Those will be the things that…I’ll be watching.”

Perhaps the biggest harbinger of potential trouble in the AI space is a surge in insurance protection against a debt default.

The cost of insuring debt issued by neocloud firm CoreWeave has spiked into distressed territory, with five-year credit default swap (CDS) spreads surging past 1,000 basis points to record highs. It has become a barometer of investor anxiety over AI.

Spreads on credit default swaps for SpaceX and Intel have also jumped this week.


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