AI: Back to Square One

AI equities are entering a more selective phase as financing costs, infrastructure constraints and tougher competition challenge the sector's earlier optimism.

• Chang Xin Memory Technologies is seeking to challenge Samsung, SK Hynix and Micron in DRAM, although its ability to produce advanced HBM products remains unproven.
• CoreWeave carries $35bn of debt and $16.5bn of lease commitments, with leverage near 6x net debt to EBITDA and a speculative credit rating; its share price fell by half in one month as CDS spreads rose.
• Average hyperscaler credit spreads increased from 60 basis points in Q4 2025 to 130 basis points, while Meta announced plans to raise up to $95bn through successive equity offerings.
• Infrastructure supply is becoming the main constraint, with land, water, electricity and local opposition affecting data-centre construction; Bernstein estimates that only 35% of 170 GW of announced North American projects will be completed.
• Anthropic's October 26 Form S-1 reported $16.3bn of H1 2026 revenue, up fourteenfold year on year, $693m of operating losses and $800bn of off-balance-sheet commitments over ten years, with a potential valuation of $1.5tn to $1.75tn.

Takeaway: Investors should expect greater differentiation across AI companies as balance-sheet strength, infrastructure delivery and pricing pressure become as important as demand growth, while Goldman Sachs' AI Winners versus AI at Risk basket has fallen more than 20% this year after gaining almost 100% by mid-June.