BusinessLineยท2025-11-08 17:04Core Insights - AI investors experienced significant stock declines, with CoreWeave, Super Micro Computer, and SoftBank dropping over 20% in a week, and losing 44%, 40%, and 22% respectively from their yearly highs [1] - Oracle's stock fell 9% during the week and is down 31% since its all-time high in September, losing gains from its optimistic FY30 revenue projections [3] - Major tech stocks, including Nvidia, Tesla, Microsoft, and Meta Platforms, also saw declines between 4% and 9% [3] Valuation Concerns - Palantir Technologies reported Q3 earnings that exceeded estimates, yet its stock fell 8% due to concerns over its high valuation, trading at a trailing PE of 424x and 177x based on estimated CY26 earnings [4] - Michael Burry's fund disclosed short positions in Palantir and Nvidia, raising further concerns about valuations [5] Market Dynamics - OpenAI's CFO indicated the need for a federal "backstop" to finance high-end AI chip investments, which was interpreted as a sign of insecurity regarding funding [6] - The Mag 7 stocks now account for about 30% of S&P 500 earnings, up from 17.5% in 2021, with their earnings compounding at 20% compared to the index's 6% [7] - Earnings of the Mag 7 have doubled from 2021 to 2025, while the rest of the S&P 500 has seen flat earnings, highlighting the reliance on these stocks for index growth [8] Historical Context - The current earnings growth of the Mag 7 is reminiscent of the high growth seen in financial stocks before the global financial crisis, which poses a risk given the current market reliance on these stocks [9] Economic Indicators - Recent data showed US Consumer Sentiment is below the lows of 2008, and job cuts in October reached over 150,000, the highest in 22 years, indicating potential economic weakness [10]