Before the Bell: AI bubble under pressure?

Are AI Concerns Artificial or Real? In Brussels, Defensive Real Estate Stocks Stand Out

The average European stock, as measured by the Euro Stoxx 50, fell 0.9% yesterday. In Brussels, the Bel20 (-0.3%) held up better. Belgium’s flagship index was lifted by its sizeable real estate component: Montea (+1.7%), WDP (+1.6%), Cofinimmo (+0.6%) and Aedifica (+0.1%) all ended in the green. Azelis was the worst performer, sliding nearly 6%. The EQT fund of Sweden’s Wallenberg family, long the largest shareholder of Azelis with almost a 30% stake, pressed the sell button last week and disposed of two-thirds of its position.

Across the Atlantic, the S&P 500 lost 0.9% and the Nasdaq slipped 0.8%. Now that major investors such as Peter Thiel and SoftBank (-7.4%) are shedding their positions in chip designer Nvidia (-1.9%), cracks appear to be forming in the AI bubble for the first time. The timing is delicate: these signals are emerging just days before Nvidia reports earnings on Wednesday evening, making investors jumpy.

This morning, Asian markets are also feeling the stress surrounding a potential AI bubble. Japan’s Topix is down 2.7%, and Hong Kong’s Hang Seng Index is off 2%. Alibaba is holding up remarkably well; after rising 2.5% on Wall Street yesterday, the stock is losing just 0.1% this morning in Hong Kong. In the U.S., Home Depot and audio-technology specialist Dolby Laboratories are set to report today.

A mix of colours

Dutch paint and coatings group AkzoNobel—known locally for brands such as Levis, Sikkens and Trimetal—is merging with U.S. coatings specialist Axalta. The two companies expect to save around 600 million dollar in costs through the combination, creating a group with 17 billion dollar in revenues. It isn’t the first time AkzoNobel and Axalta have danced the tango: in 2017 the two explored a merger, but talks failed. This time, the deal is going ahead. AkzoNobel shareholders will own 55% of the combined company, with Axalta shareholders taking the remaining 45%.

Amazon issues new bonds

Amazon plans to raise 12 billion dollar through a bond offering. The e-commerce giant wants to use the proceeds to ramp up investments in artificial intelligence. It has been three years since the company last issued a bond, but Amazon is far from the first U.S. tech group to tap debt markets for AI spending. Alphabet, Meta and Oracle have already raised 25, 30 and 18 billion dollar respectively. In total, more than 200 billion dollar has been raised in the U.S. to fund AI investment.

Finding buyers for Amazon’s bonds won’t be hard. Amazon Web Services, with roughly 30% market share, is the world’s largest cloud provider, followed by Microsoft Azure (20%) and Google Cloud (13%). Clients of these platforms are demanding more AI features, and building that functionality requires heavy capital investment. Since 2022, AWS’s computing capacity has doubled, and Amazon expects capacity to double again by 2027. Someone has to pay for it.

Did you know…

Amazon raised 672 million dollar through a bond issue 25 years ago, just before the dotcom bubble burst? That financial buffer helped the company survive the severe crisis that followed.jumped 4% in after-hours trading—suggesting the stock may start the week on a positive note.

This article was translated from Dutch and was originally published on Spaarvarkens.be.