AI Stocks Are Getting Crushed, But This Strategist Says the Pullback Could Keep the Boom Alive: 'Restraint Prevents Excess'
James Thorne, Chief Market Strategist at Wellington Altus, argued Thursday that investors may be misreading the pullback in artificial intelligence stocks, saying the correction could ultimately help extend the AI boom.
Why a Pullback Could Help
AI-linked stocks led Thursday’s tech selloff, with the tech-heavy Nasdaq 100 falling 2.90%.
In a post on X, Thorne said it was a “natural, healthy correction” that was overdue and argued that a short-term downturn could keep the boom from “collapsing under its own weight.”
Lower valuations, tougher credit scrutiny and slower construction impose discipline, he said, stretching investment over more years and easing the inflationary pressure of a concentrated spending surge.
Falling share prices, he pointed out, are “not falling demand for computing power,” and slower capital expenditure growth is not shrinking investment.
The market sees friction as a threat, Thorne contended, but “restraint prevents excess, cools the inflationary impulse and gives the AI boom more time to run.”
Friction Builds From Communities to Credit Markets
The friction he described is already visible. About 157 U.S. data center projects have been paused, severely delayed or canceled since 2024, according to a Politico report, citing S&P Global’s 451 Research.
San Francisco recently imposed a 45-day moratorium on data center development, and President Donald Trump has urged developers to pay host communities a “dividend” to ease local opposition.
Credit markets are also getting choosier, Thorne argued.
Meta Platforms Inc.‘s (NASDAQ:META) five-year credit default swaps hit a record 114.79 basis points on Thursday, according to Markit data cited by Reuters.
CoreWeave Inc.‘s (NASDAQ:CRWV) 2031 bond yield reached a record 15.8%, according to TradingView.
More Years to Build, Less Strain
Spreading construction over more years, Thorne reasoned, eases the strain on equipment, labor and electricity infrastructure, giving suppliers time to expand and power systems time to catch up.
Price Action: The State Street SPDR S&P 500 ETF Trust (NYSE:SPY) closed 1.18% lower on Thursday at $763.96 and fell 0.13% in overnight trading. The Invesco QQQ Trust (NASDAQ:QQQ) fell 2.86% to close at $704.47 and gained 0.06% in after-hours trading.
Benzinga Edge rankings indicate the Invesco QQQ Trust has a Momentum score in the 75th percentile and has a negative price trend in the short and medium term, while it has a positive trend in the long term.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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