NEW YORK / LONDON (IT BOLTWISE) – Tech stocks are falling despite the end of the longest government shutdown in U.S. history. Investors are worried about a potential AI bubble fueled by massive investments in data centers. At the same time, hopes of a rate cut by the Federal Reserve in December are fading.
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Recent developments on the stock markets show that even positive political decisions do not always lead to an increase in prices. Even though President Donald Trump announced the end of the longest government shutdown in U.S. history, stock markets, particularly the tech-focused Nasdaq, have fallen. This could be due to investors’ concerns that current investments in artificial intelligence (AI) could form a bubble.
The discussion about a possible AI bubble has gained momentum in recent weeks. Companies like NVIDIA and Palantir, which benefit greatly from AI investments, have suffered significant share price losses. NVIDIA posted a 7% decline last week, while Palantir still fell 8% following impressive quarterly results. These developments show that market participants are increasingly skeptical about the high valuations in the AI sector.
Another factor weighing on markets is uncertainty about the Federal Reserve’s future interest rate policy. Due to the government shutdown, key economic data such as inflation and jobs reports have been delayed, complicating the Fed’s decision-making. The likelihood of a rate cut in December has fallen from 96% to 47%, according to recent data, further adding to market uncertainty.
Historically, the end of a government shutdown has often led to a rise in stock markets. Since 1976, the S&P 500 has typically risen in the months following a budget resolution. But the current situation is more complex, as investors have to take into account not only political developments, but also economic conditions and valuations in the AI sector. The coming weeks will show whether concerns about an AI bubble are justified or whether markets can stabilize.
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