The AI sector faced a massive sell-off last week as investors worried about rising debt levels. CoreWeave fell 25% while the VanEck Semiconductor ETF saw its worst week since April 2025. Markets grew nervous because companies must repay the huge loans they took to build expensive new AI infrastructure projects.
Hola Espresso Lovers! When you have a Saturday like the one we had yesterday, the weekend doesn't even feel like one. In fact, the last week was about too many things for it to be about anything in particular. The AI meltdown, Donald Trump's consistent meltdowns, the largecaps finally waking up from their slumber, the recovery in Indian IT, oil prices, West Asia, Yes Bank, earnings, ugh. Yeah, etc. was not the best punctuation after a list like that.
The AI dudes are funny. The ones who built it, and the ones who are building the infra around it as well. The created the fad and now, the fad has become so big, that they are finding it difficult to control. Reminds me of Govinda's line to Shakti Kapoor in Jaisi Karni Waisi Bharni (1989) where he tells him "Aisa lagta hai jaise ek daaku saari duniya ke ghar loot ta raha, aur jab uska khudka ghar lootne ki baari aai, to ghabrakar wo daaku, sadhu ban gaya!" Its funny to see how they are now appealing for regulations, controls and what not. In trying to do all of this, they completely ignored one very important thing.
The AI buildout has required massive amounts of money. Enough to eradicate poverty across the globe, but that can wait. Not very important. Some of the companies have taken on massive amounts of debt to build this AI infra. Suddenly, the street began to realise that this debt will have to be repaid too. AI won't come and repay it for them.
The result? A proper sell-off. CoreWeave's 9% coupon bond is currently demanding a yield of almost 17%. The management has already sold shares worth over $3 billion over the last year. The CEO remains defiant, Jensen Huang, the Nvidia chief, is backing it, not because he trusts them, but because Nvidia is a shareholder, but the street had none of this nonsense. CoreWeave fell 25% last week, the VanEck Semiconductor ETF had its worst week since April 2025, and this AI meltdown percolated down to the Asian markets like the KOSPI as well.
The KOSPI is becoming the Vinod Kambli of the Asia-Pacific. The overnight fame became so difficult to digest that one wrong step after another has taken the market into a stage of near-oblivion. The once-upon-a-time shining star of the Asia Pacific has now become a subject of neglect. So much so that the index, which was up 100% for the year sometime in mid-May or early June, is now up only 30%, foreigners are still dumping shares there, and retail investors have completely lost faith, prompting multiple apologies from President Lee Jae Myung. Well, KOSPI's downfall is a blessing in disguise for our own markets, and why we don't pray for anyone's failure for our own success, we cannot go against the law of nature.
After what our markets have endured over the last three months, if I tell you that the Nifty has gained over 900 points in the last six sessions, you'd have to register for the next edition of Ripley's Believe It or Not, or even Maano Ya Na Maano! Believe it or not, but it has happened! A couple of weeks back on Editor's Playbook, we spoke about whether HRITHIK will dance again. Well, some parts of that HRITHIK did dance, bringing some much needed joy to the Nifty. HDFC Bank, Reliance, ICICI Bank, TCS, all of them did very well last week and when the index heavyweights do well, the index powers on. To more such recovery, God Speed!
Indian IT is giving out the dead man walking imagery all through last week and with the kind of meltdown being witnessed on the AI trade globally, that may well continue. From Obit plates, to Abhi Hum Zinda hai, it's been quite a journey. Look at these stocks last week - Tech Mahindra up 18%, TCS up 14%, Infosys, Wipro and HCLTech up 13.5% each. For the Nifty IT, it is the best week since 2008! And it was not just the AI meltdown that caused this recovery. The market eventually begs for numbers. And they deliver on them. Subdued expectations, yes. But they surpassed the subdued expectations. It is not as if they reported blowout quarters, but when no bad news is good news, the market will take it when all it has heard through the year, is bad news. And as Salil Parekh told us, Indian IT Zinda hai. Very much so.
And what do you say to Donald Trump? The man who wrote a 500-word essay on Truth Social as to how he "deserved" the Nobel Peace Prize, but was deprived of it yet again. The crying was louder than the kid deprived of his favourite toy in the toy store. The man had threatened sweeping sanctions on countries dealing with Russia in honour of his late friend Lindsay Graham, by passing a bill in his name, threatening tariffs of up to 100% on countries that had business dealings with Russia. Very well. What does he do next? Signs a deal for getting diesel from Russia, calls it in favour of Americans, justifies it to the core and removes the same sanctions he once threatened on others, because how can he sanction himself?! Whether the diesel comes or not is secondary, but the sanctions are gone. More relief to us, although that was never a full blown threat, it was a lingering overhang nonetheless.
A small part of the market recovery this week was also attributable to Finance Minister Nirmala Sitharaman, who said that she is open to hearing views on equity taxation, particularly on STT and LTCG. That in itself was enough to get hopes high. The budget is still four months away, but when has hope ever seen a timeline to spring up. That hope will keep lingering on until the official announcement is made on February 1, or maybe even before that, in case the government plans on a Diwali dhamaka! Who knows what the future holds? We'll remain optimistic!
Warren Buffett once said that the stock market is a device for transferring money from the impatient to the patient. Yes Bank's investors have been patient for years now and are still waiting for that money transfer. Then comes the Supreme Court, knocks one out of the park on the ₹8,400 crore AT-1 bonds issue and sends the stock down nearly 20% in two sessions. The bank had a nine-hour long board meeting on Saturday. The result? Nothing. Still assessing the impact. Whether it happens in the next quarter or the quarter after, investors lost money, whether bond holders get theirs back or not, time will tell. This one has been a test of patience, for us on Saturday, and for shareholders since 2019. Hopefully, it'll pay off someday.
Super Saturday brought about a bunch of results, as it always does once every quarter. HDFC Bank, ICICI Bank, Axis Bank and many other companies came out with results. A common thread between HDFC Bank and ICICI Bank? The margin pressure, even as ICICI outshined HDFC on most other parameters. It will be interesting to see how the stocks react on Monday as while HDFC Bank is a beaten down name, ICICI Bank is the only one among the HRITHIK gang that has delivered some returns over a five year period!
The next week is a truncated one. Does not mean it is devoid of action. The developments in West Asia continue, oil prices are still high, the AI meltdown will remain in focus, US Secretary of State Marco Rubio is in India, and earnings continue at their pace as well. There is enough and then some more, just ithese four days. And who can forget, the MOTHER OF ALL IPOs is here too. Jio Platforms' ₹30,000 crore-plus issue, the biggest in Indian history, will also open for subscription on Wednesday, and that will be keenly monitored across the street through the week. We'll have our eyes glued to it as well. It promises to be an action-packed IPO.
For now, Tuesday is Dusshera, the day symbolising the victory of good over evil and we can pray that every good in this world triumphs emphatically over evil sooner or later, and as Javed Saab wrote, Sach aur saahas hai jiske mann me, ant me jeet usi ki hogi! We'll return next week with the latest brew, until then, have a good rest of the Sunday before returning to the grind!