Newsletter — week of October 12, 2026

Market performance

A week of sharp correction for technology stocks. The S&P 500 (the index of the 500 largest U.S. companies) falls 1.9%:

The Nasdaq (an index dominated by technology) for its part fell 4.5%:

The gap between the S&P 500 and the Nasdaq shows a rotation we’ll return to in detail in section 2.

Market news

AI: fears over financing

After the record on October 6, AI stocks sold off all over the world. On Wednesday, CoreWeave lost more than 15%. This specialist in AI-dedicated cloud, a « neocloud, » carries about $50 billion of debt. Oracle fell about 9%, AMD nearly 6%, and Nvidia more than 3%.

On Thursday, the correction reached Asia. The Kospi (Seoul exchange) fell 7.6%, with SK Hynix at −11% and Samsung at −9.5%. The Nikkei (Tokyo) fell 4.9%.

On Friday, Goldman Sachs said that hedge funds had sold AI stocks at the second-fastest pace in more than a year, which it calls a « tactical rotation. »

Several triggers hit at once, the main one being the higher-than-expected inflation we discuss below, which risks keeping interest rates high.

What should be noted is that it isn’t demand that’s being called into question. On Thursday, TSMC, the world’s leading chip maker, reported record profit up 68.7% year-over-year. It also announced a fourth-quarter revenue forecast well above expectations, without its stock rising.

The question has therefore changed. It’s no longer « is AI demand real? » but « who finances the data centers, and at what cost? » With a 10-year yield that brushed 5.3%, borrowing becomes harder.

AI stocks, which had tended to rise all together in the spring in a kind of euphoria, must now be chosen carefully. There will be winners and losers. We hold, for example, a neocloud in the portfolio, a competitor of CoreWeave. Even though it is currently suffering like the rest of the sector, our stock is still up 90% in 2026 while CoreWeave is down 50%—a performance gap of 140 points. We hadn’t chosen CoreWeave, precisely because of its financing structure and its debt. Our stock carries almost no debt, and we therefore remain very calm despite the decline.

Inflation came in higher than expected

On Wednesday, September’s consumer price index was released: it rises 0.6% on the month and 3.7% year-over-year, versus 3.6% expected. Core inflation, which excludes energy and food, comes in at 2.6%. Gasoline jumped 9.1% on the month and explains more than half of the monthly increase.

On Thursday, September’s producer price index was released and also rose at its fastest pace since 2022.

Below, the current probabilities of a change in the Fed’s rates:

Even though it is now almost certain that the Fed will not raise rates in October, it is becoming very likely that it will raise them in December.

The pressure on long-term rates remains. We stay skeptical about the effectiveness of a rate hike in the face of an oil shock. Raising rates does not bring the barrel down. It mainly makes financing the economy more expensive, including AI financing. We understand, nonetheless, that the Fed is in a delicate situation, and that the only real solution to this problem would be an end to hostilities in Iran and Ukraine—which, unfortunately, does not appear imminent.

Beneath the surface, a positive rotation

As noted in section 1, the performance gap is wide this week between the Nasdaq, made up of technology stocks, at −4.5%, the S&P 500, the broad index, at −1.9%, and above all the Dow Jones, at +0.5%.

The Dow Jones is a broad index made up of all sectors, like the S&P 500. It differs from it, however, in how it’s calculated. The S&P 500 weights each company by its stock-market size, its market cap. The Dow Jones weights them by their share price. A company whose share is expensive therefore carries more weight in the index, even if it is smaller than another.

The Dow Jones is thus far less exposed than the S&P 500 to the swings of the technology giants. As a result, it strongly outperforms the S&P 500 and especially the Nasdaq this month. This shows that other sectors are advancing on the market despite the AI correction.

To confirm this, about 43% of S&P 500 stocks are trading above their 50-day average, double the level at the start of the month, which shows a clear improvement for non-technology sectors.

The correction is therefore less worrying than it looks. The market isn’t anticipating a recession—otherwise all stocks would fall. It is simply reassessing its risk on the AI sector.