The rapid ascent of AI-related stocks and cryptocurrencies is showing signs of cooling off, reflecting broader market concerns about the resilience of the AI boom and the likelihood of central banks cutting interest rates. Iren, an Australian company that initially focused on bitcoin mining but strategically pivoted to become an artificial intelligence data centre player, has seen its shares fall 45 per cent since November 5 after experiencing massive growth. The company provides processing power and signed a $US9.7 billion deal with Microsoft this month.
Similar declines are evident across the board, with other bitcoin miners such as Cipher Mining and TeraWulf also suffering losses. Bitcoin itself has plunged 30 per cent in two months, while Ether is down 42 per cent from its recent peak. Quantum computing stocks, including Rigetti Computing, IONQ, and D-Wave Quantum, have also experienced sharp falls after significant gains. Private credit and private equity sectors are under pressure too, with Wall Street-listed Blue Owl down 47 per cent from its high and giants like Blackstone and KKR experiencing declines.
The rallies in these speculative areas were driven by expectations of continued AI growth, government stimulus, and a shift towards private markets, all fuelled by the anticipation of central bank rate cuts. However, with those rate cut hopes fading, as suggested by recent US jobs data, the most bubbly parts of the market are feeling the pinch. Bank of America strategist Michael Hartnett highlights US bank indices and crypto as key indicators to watch for signs of the Federal Reserve potentially capitulating and cutting rates.
