Last week's sharp selloff in artificial intelligence stocks may have been more noise than signal, according to analysts at Morgan Stanley and UBS. In notes to clients, the two banks argued that the market's reaction to Washington's scrutiny of data centers looked like a knee-jerk response rather than a genuine break in AI demand. Instead, they say investors should focus on two concrete events that will offer a clearer read on the health of the AI trade: Nvidia's earnings, due after the close on November 17, and the planned initial public offering from AI startup Anthropic.
Why the selloff happened
The recent turbulence began after reports that U.S. regulators were looking into data center operations, a key piece of the infrastructure that powers AI. The news rattled investors who had piled into AI-related stocks, sending shares of chipmakers and other tech names lower. The selloff was broad enough that some strategists, including Citi, trimmed their ratings on U.S. stocks and tech to neutral.
But Morgan Stanley and UBS see the regulatory headlines as a distraction. In their view, the underlying demand for AI computing and the companies that supply it remains intact. They argue that the real test is whether the biggest players can keep delivering the kind of growth that justifies their valuations.
Nvidia's earnings as the key checkpoint
Nvidia, the dominant maker of AI chips, is scheduled to report quarterly results on November 17. The company has become a bellwether for the entire AI sector, and its numbers are often seen as a proxy for how much companies are actually spending on AI infrastructure. A strong report could reassure investors that the selloff was overdone, while a miss could reignite concerns.
The stakes are high. Nvidia's stock has been volatile recently, with premarket drops tied to various headlines, including a probe and spy claims involving its CEO. The company's guidance for the coming quarters will be scrutinized for any signs that customers are pulling back on orders.
Anthropic's IPO as a demand signal
Anthropic, a leading AI startup known for its Claude chatbot, is reportedly planning to go public. An IPO from a company like Anthropic would be a major test of investor appetite for pure-play AI businesses. If the offering is well received, it could signal that the market still believes in the long-term growth story. If it struggles, it might suggest that the selloff was more than just a blip.
IPOs are often seen as a barometer of market sentiment. A successful debut would not only validate Anthropic's business but also provide a fresh data point on how much investors are willing to pay for AI exposure beyond the established giants like Nvidia.
What it means for investors
For everyday investors, the takeaway is that short-term market moves are not always reliable indicators of what's ahead. The recent selloff, while unsettling, may not reflect a fundamental change in the AI industry. Instead, it could be a case of investors reacting to headlines before the underlying data comes in.
That said, the upcoming events carry real weight. Nvidia's earnings will show whether the company can maintain its explosive growth, and Anthropic's IPO will test whether the market's enthusiasm for AI startups is still intact. Both are worth watching closely.
It's also worth remembering that AI-related debt deals are facing tougher scrutiny after the recent market turmoil, which could affect how companies fund their AI ambitions. And while competitors like Google are introducing their own AI chips, Nvidia's dominance remains a key factor in the sector's performance.
Ultimately, the banks' message is simple: don't overreact to a single week of trading. The real signals will come from the numbers, not the noise.
