The ‘death spiral’ that is ominous for the neoclouds and could destroy the Wall Street boom

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Swotting up on investment bubbles has become fashionable in recent months.

Satya Nadella, the Microsoft boss, is telling everybody to buy 1873, a book about the railroad boom and bust. Barack Obama recommends 1929, a recent bestseller about the interwar crash.

One day, “2026” may be another ominous title on a famous person’s reading list.

In recent days, a stratospheric AI boom has been replaced by bubble fears as financial markets are jolted by a severe loss of confidence in many of the companies propping up the industry.

Shares in Nvidia and Oracle, two poster children of the boom, are down 10 per cent from their peak earlier this month, while Anthropic investors have reportedly cut expectations for its looming trillion-dollar IPO.

The gym junkie tech boss whose company sustained a $3 billion wipeout

The greatest damage, however, has been inflicted on a cluster of less well-known names.

Companies such as CoreWeave, Nebius and Iren have all suffered seismic sell-offs as investors baulk at their heavy losses and inflated borrowing costs.

Sceptics believe that distress at these companies, which have borrowed billions to finance a data centre building boom, could be the warning sign for a reversal of the AI trade that has been responsible for most of the stock market’s gains in recent years.

Ken Griffin, the billionaire chief executive of trading firm Citadel, has become the latest investing heavyweight to warn about a bubble, and said last week that we were “almost certainly” in one.

“Any radical transformation of our economy is generally intertwined with a bubble,” Griffin said at a conference........

© The Sydney Morning Herald