S&P 500 cuts losses as Nvidia climbs ahead of results
Investing.com -- Barclays analysts warn that the dominance of Big Tech as the key driver of US exceptionalism comes with risks, as the recent volatility in AI stocks has shown.
“DeepSeek bursting onto the scene this week has quite rightly caused a jolt to the collective group-think that Big Tech is a one-way trade,” they noted.
The bank adds that stock reactions were largely explained by the varying loftiness of valuations/expectations, and the potential impact on each company’s business models.
While hyperscalers welcomed DeepSeek’s emergence as a catalyst for AI adoption, Barclays (LON:BARC) expects shifting capital expenditure priorities.
“It is unlikely to alter the size of this year’s expected AI/Data centre capex spending plans… Further out, it may alter the shape of capex spending,” particularly in how funds are allocated between AI model training and inference.
Barclays believes this could lead to a shift in investor focus “more towards the adopters, and therefore productivity gainers from AI” rather than the hardware providers that have led the AI rally.
The AI shake-up has contributed to broader equity market shifts. “With AI hegemony starting to show some cracks and highly concentrated portfolios hit hard this week, we believe that investors may start to broaden out their allocation,” Barclays wrote.
Their latest Who Owns What report suggests that this could reduce reliance on US tech and potentially provide Europe an opportunity to close the performance gap.
So far this year, Barclays said the AI-driven selloff has “led to a sharp de-concentration, allowing more stocks to outperform the benchmark compared to the last two years.” Barclays views this as “a rather healthy development” that may encourage a more diversified market environment.