Market volatility tests AI enthusiasm as Anthropic pursues public listing
Stock declines at major technology firms raised questions about investor confidence in artificial intelligence spending, even as one of the sector's leading developers moved toward going public.
Turbulence rippled through equity markets last Friday, with mounting skepticism about whether the artificial intelligence sector has grown overheated. Shares of Intel Corp., Alphabet Inc., Amazon.com Inc., CoreWeave Inc. and Fortinet Inc. all declined, signaling potential investor wariness regarding the scale of capital being committed to AI infrastructure. Simultaneously, Anthropic PBC submitted paperwork for an initial public offering to the U.S. Securities and Exchange Commission, positioning itself as a major debut for one of the industry's most prominent AI firms, despite remaining unprofitable.
Adding to market movements was news that Intercontinental Exchange (ICE), the parent of the New York Stock Exchange, will collaborate with TradeXYZ to introduce perpetual futures markets powered by the Hyperliquid cryptocurrency trading platform within the United States.
John Furrier, executive analyst at theCUBE Research, observed that the competitive landscape for exchanges is undergoing fundamental transformation. "The whole idea of exchange is going to change," Furrier stated. "It reminds me of cloud computing, how it re-leveled the data center. NYSE is the cathedral of capitalism. Nasdaq started as an over-the-counter bulletin board. Tech was early there and then only listed there. But now the game has changed. It's very interesting to see how the competition between the NYSE and the Nasdaq is going to play out."
On the latest theCUBE Pod episode, Furrier and Dave Vellante, chief analyst at theCUBE Research, examined what Anthropic's public offering and the week's market movements reveal about potential overvaluation in AI. The discussion also covered missteps at Intel and the emerging potential for companies offering comprehensive infrastructure solutions.
AI bubble releases some air
Alphabet's shares dropped more than 12% following disclosure of a sluggish quarter in advertising and search revenue, with observers attributing the decline to competition from chatbot applications diverting user attention from traditional search. Amazon experienced a similarly difficult session, with its stock falling 7% as the company continues substantial spending on AI infrastructure expansion.
Vellante characterized the recent pullback as a constructive development for the sector's long-term health. "Think of the tulip bubbles in the 1600s," Vellante said. "Think about the Japanese real estate bubble in the 1980s. And you think about the dot-com. That dot-com was actually different. Dot-com, they were all … overhyped. They drove massive valuations. But the dot-com actually played out. It actually exceeded expectations. And I think there's some things that we can learn from there."
Furrier identified indicators of a sustainable expansion cycle, beginning with the cloud infrastructure growth required to enable AI advancement. He contended that the infrastructure expansion could proceed in parallel with consolidation in the emerging neocloud segment, particularly as enterprise-level AI applications begin generating employment rather than displacing workers. The recent market weakness, he argued, does not necessarily signal an imminent collapse of AI valuations.
"Rationale is kicking in, common sense," Furrier said. "You're starting to see the beginning of a transition. Wall Street is trying to figure it out. I think they don't yet get it. But if you look at the language of the experts on the inside and how all the IPOs are being positioned, the value of these IPOs — they want durability. That transition from Silicon Valley tech ecosystem platforms is going to move into the markets. This is a platform game."
Intel suffers setback
Intel's stock experienced the sharpest decline of the week, falling nearly 30% following its Thursday earnings announcement. The company's emphasis on central processing units rather than graphics processing units represents a strategic miscalculation, according to Vellante; the critical competition, he suggested, centers on AI platforms rather than processor architecture alone. Both analysts nonetheless expect Intel to recover some losses.
"Lip-Bu Tan and Intel have an opportunity," Furrier said. "You basically lost the hyperscaler market that they once had a foothold in. You still run x86 on some clusters. But they got to look at other footprints. I think he'll turn it around. It's a multiyear journey, as he says. But the fact of the matter is why I don't think it's a bubble, is companies like Alphabet dropping major, major action, $500 billion, in a day."
Intel represents merely one element within a swiftly evolving technological landscape. Although parallels exist between current AI enthusiasm and previous market manias, theCUBE's analysis concluded that the present situation remains distinct, presenting challenges the market will navigate across multiple decades.
"This is just a natural adoption phase," Vellante said. "What's different is a lot of things. Like you said, tech is suddenly deflationary. We're trading CapEx for labor, and that hasn't really kicked in yet. We're seeing individual productivity gains but it hasn't shown up at the firm level yet. These things just take time. And, of course, Wall Street's like, show me the money."