Tech Slump Deepens

• Tech stocks, including the Nasdaq Composite and Semiconductor Index, saw sharp declines due to anxiety over AI spending and semiconductor supplies.
• Leveraged ETFs amplified market volatility, contributing to significant selling pressure, with an estimated $45 billion in selling on Wednesday alone.
• US government restrictions on advanced AI models (Anthropic, OpenAI) and rising memory chip prices are leading to demand destruction and a re-evaluation of the AI trade's sustainability.
• The cooling IPO market, exemplified by SpaceX's volatile stock and OpenAI's consideration of delaying its IPO, highlights financial challenges and questions about revenue generation for high-valuation tech companies.
• Technology, traditionally a driver of disinflation, is now contributing to inflation due to rising chip costs, forcing companies like Apple to consider price hikes and alternative suppliers.

Technology stocks experienced a bruising week, with major indices seeing significant declines due to concerns over AI spending, semiconductor supplies, and amplified market volatility from leveraged ETFs. The cooling IPO market and evolving US restrictions on advanced AI models further dampened sentiment, raising questions about the sustainability of the AI trade and the ability of companies to justify soaring valuations amid rising costs.