Funding Fears Threaten AI Bull Market
Early in the year, investors rushed into tech stocks as AI innovations, investment, and rapid growth expectations drew attention away from the rest of the market. AI-related leaders like Bloom Energy (BE), SanDisk (SNDK) and Advanced Micro Devices (AMD) each soared more than 100%. However, over the past few months, Wall Street’s price action has completely flipped. Although major market indices are within a hair of all-time highs, leading AI-stocks have been lackluster, with many down 50% or more off their 2026 highs.
What Caused the Destruction in AI Stocks?
Gravity & Profit Taking
First, while the correction in AI-related names is undoubtedly painful for bulls (especially those who bought near the highs), corrections of this magnitude are normal in bull markets. For example, SanDisk exploded by ~2,800% from August 2025 to June 2026. In other words, after such a massive move, profit taking is to be expected. Currently, SanDisk is testing its rising 200-day moving average, the best gauge of the long-term trend, for the first time in its history. Again, even the strongest stocks occasionally succumb to the laws of gravity.
Image Source: Zacks Investment Research
The AI Debt Fear Narrative
More recently, selling in AI stocks has intensified amid a sharp shift in Wall Street sentiment regarding AI spending and the sustainability of debt loads. The tipping point came when neocloud leader CoreWeave (CRWV) saw its unsecured bonds dumped, pushing yields to a distressed 15%. In other words, the move in CoreWeave’s bonds suggests fixed-income investors have far less confidence in the company’s ability to meet its ballooning debt. So far in October, CoreWeave shares have plunged nearly 40%, dragging other neocloud and AI -related stocks like Nebius Group (NBIS) along with it.
Image Source: Zacks Investment Research
CoreWeave, which started as a Bitcoin Mining company, pivoted to AI data centers during the 2022 crypto bear market. Today, it is a specialized AI cloud provider that rents out massive clusters of graphics processing units (GPUs) and infrastructure to companies training and running AI models. Building massive AI data centers requires heavy upfront expenses for CoreWeave because its business model demands immediate, large-scale capital spending on infrastructure and hardware before it collects cash from customer contracts.
The Betting Markets Tell a Different Story
I’ve found that betting markets are far more reliable than traditional surveys or opinions because participants have real money at risk. While many headlines suggest a CoreWeave bankruptcy is imminent, the betting markets suggest otherwise. Polymarket bettors assign only an 11% chance of a CoreWeave bankruptcy filing by the end of next year.
