Skip to main content

Global Advisory

Expert M&A and capital markets advice

Wealth Management Luxembourg

Dedicated to helping individuals and families preserve and grow their wealth over the long term

Asset Management

Global investment solutions and services to institutional clients, financial intermediaries and independent financial advisers

Five Arrows

Our alternative assets arm, managing funds dedicated to private equity and private debt

About us

Over 200 years at the centre of the world's financial markets

Careers

A company of opportunity, entrepreneurialism and growth

Location & language

Select Region Select Language

AI jitters return

Published
Read length

AI fragility has returned, with markets once again vacillating between boom and doom over the scale of AI-related financing.

After a very narrow and divided stock market in September, when the median US stock fell nearly 5% while the technology sector rose 4%, October has been almost a complete mirror image. Over the past three weeks, a basket of semiconductor stocks has dropped more than 15%, while the highly concentrated South Korean index has fallen back nearly 20%.

Selected equity market relative returns: 2026 YTD (USD terms)
Market capitalisation weighted index relative to equal weighted index returns

AI Jitters Figure 1.png

Source: Rothschild & Co, Bloomberg, S&P Global. Correct to 22 October 2026

This fragility has also extended to credit markets, where the yield 'spread' over government borrowing costs has widened to its highest level since the spring. Some of this widening is likely explained by the rally in government bonds, with which corporate borrowing costs have not kept pace. The strong positive correlation between oil prices and bond yields has broken down in recent days: Brent has been grinding higher through October ($116/barrel as we write, up 13% this month), yet US Treasuries had their biggest one-day rally in more than three years yesterday, with the 10-year yield falling back by ~30bps since the start of the month.

This latest AI rout seems to be less about deteriorating fundamentals – third-quarter earnings have provided some comfort (at least so far). Anxiety is most visible in the highly leveraged segment of the AI ecosystem.

AI cloud providers, the so-called neocloud companies, are at the bleeding edge of this rotation today. This cohort has roughly halved since its June highs, and most are now down year to date. Even for AI optimists, these specialised compute providers are a brave proposition: CoreWeave, perhaps the best-known, has around eight turns of debt and a revenue stream heavily concentrated among a handful of customers, led by Microsoft and OpenAI. A highly leveraged owner-operator of potentially fast-obsolescing assets, with an ambiguous revenue runway. What could go wrong?

While there are undoubtedly vulnerabilities within the AI story, the notion that we are at some sort of inflection point may also be premature. As the chart above shows, we have seen this rotation between the largest stocks (dominated by technology names) and the wider market twice in 2026 alone.

For the most part, the more highly geared AI companies make up a relatively small share of the equity and debt markets. Meanwhile, the hyperscalers – which comprise a non-trivial weighting in the wider index – have proved much more defensive through this volatility. That applies to their share prices as well as, relatively speaking, their credit spreads. Strong operating cash flows and even stronger balance sheets (despite rising debt issuance) provide a reassuring backstop should wider financing concerns become more visible.

Ready to begin your journey with us?

Speak to a Client Adviser in the UK or Switzerland

Past performance is not a guide to future performance and nothing in this article constitutes advice. Although the information and data herein are obtained from sources believed to be reliable, no representation or warranty, expressed or implied, is or will be made and, save in the case of fraud, no responsibility or liability is or will be accepted by Rothschild & Co Wealth Management UK Limited as to or in relation to the fairness, accuracy or completeness of this document or the information forming the basis of this document or for any reliance placed on this document by any person whatsoever. In particular, no representation or warranty is given as to the achievement or reasonableness of any future projections, targets, estimates or forecasts contained in this document. Furthermore, all opinions and data used in this document are subject to change without prior notice.

Read more Wealth Management UK articles

What to do ahead of the 2026 Budget

With Budget speculation intensifying ahead of 28 October, investors should avoid reacting to rumours alone, while reviewing potential tax planning opportunities around CGT, IHT, pensions, property and investment structures.

Debt and taxes

Fiscal debates focus on debt and deficits, but government size may matter more. While debt shows little link to bond yields, higher taxes and spending can affect competitiveness, growth and economic efficiency.

France: Fiscal pressure

France’s political uncertainty and fiscal pressures have unsettled markets, widening bond spreads and weakening the euro. While risks remain elevated ahead of 2027 elections, France’s challenges stop short of a sovereign debt crisis.

Emotionally invested

This Quarterly Letter explores how emotions and behavioural biases can undermine investment decisions. It highlights the importance of discipline, perspective and a clear long-term purpose in preserving and growing wealth through market uncertainty.

Entrepreneur Networking Dinner

Rothschild & Co Wealth Management UK recently hosted an intimate networking dinner to encourage the conversations and connections that rarely happen in the day-to-day demands of building a business.

Is winter coming for the UK consumer?

Despite recent resilience, UK consumers face mounting pressure from higher energy and food prices, potential tax rises and higher interest rates, all of which could weaken discretionary spending and economic activity this winter.