Traders still like AI, but maybe not data centers
There seems to be some hedging of bets.
The stock market put together a respectable recovery from the panic of Monday’s DeepSeek dive, especially market behemoth Nvidia’s recovery of a solid $125 billion or so in market value to retake the $3 trillion mark in terms of market cap.
Clearly the AI trade isn’t dead.
But on closer inspection, the damage to stocks associated with the capital expenditure blitz on data centers that we’ve seen over the past few years continues to be deep.
Meanwhile, the recovery in so-called AI software stocks — firms like Salesforce, Palantir Technologies, and ServiceNow, which stand to benefit from AI advancements without sinking massive amounts of capital into highly illiquid bets on cavernous data centers — has been much more robust.
As of Tuesday, the Goldman Sachs thematic bucket of AI software stocks is now outpacing stocks depending on the ongoing largesse of big data center spenders for the first time over the last year. (See above.)
Of course, even within that carnage there are a few recovery stories, with GE Vernova and Vistra rallying strongly after the former announced a deal with Chevron to form a company to supply power to data centers.
Sure, it could be a mere fluke that will revert once the animal AI spirits recover. At the same time, the scale of the paper losses yesterday in some stocks is bound to make an impression on investors, and shifting exposure from asset-heavy AI bets toward AI free riders seems to make a lot of sense if the technical advances on DeepSeek — which our colleague is smart enough to understand and explain — are legit.
