AI Trade Shifting Focus to Balance-Sheet Health, Credit Cycle

Dow Jones10-20 17:15

0915 GMT - The artificial-intelligence trade shifts to a balance-sheet and credit cycle story from a purely growth story, Tickmill Group's Patrick Munnelly says in a note. "The market is increasingly asking not only whether AI demand is real, but who is funding it, on what terms and with what margin of safety," he says. The dive in Seoul-based AI cloud-computing firm Elice's shares on the first day of trading on Tuesday adds to concerns over debt-financed AI infrastructure investments. Investors are now differentiating cash-generative platform winners and high-quality semiconductor suppliers from capital-intensive infrastructure firms and leveraged financing vehicles, he notes. While the differentiation is healthy in the long run, it's destabilizing in the short run as positioning remains crowded, he adds.

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