Wall Street's record-setting rally faced a reality check this week as the most crowded corner of the AI trade showed signs of strain, sending ripples through risk assets including cryptocurrencies. Alphabet shares fell about 4% after a sweeping leadership overhaul in its AI division, with several high-profile researchers departing to launch a new startup, Discovery Loop. The delay of Google's flagship Gemini model has intensified fears that the tech giant is falling behind rivals, unsettling investors who had piled into AI-linked stocks.
Meanwhile, SpaceX dropped 12% despite beating earnings estimates, as a sixfold surge in capital expenditures—driven largely by AI initiatives—raised concerns about spending sustainability. The company's first post-IPO lock-up expiry, potentially freeing up to 912 million shares, added to the volatility. The semiconductor space also took a hit, with memory and storage stocks like Western Digital and SanDisk sliding even after posting stellar results, underscoring that merely beating estimates is no longer enough to sustain sky-high valuations.
In commodity markets, gold rallied to a seven-week high amid lower Treasury yields and a weaker dollar, while oil prices eased on renewed diplomatic hopes around Iran. Those macro factors, combined with cautious Federal Reserve commentary and weak private payrolls data, kept traders on edge ahead of Friday's nonfarm payrolls report. For crypto, the environment suggests a cautious tone: Bitcoin and major altcoins are likely to trade sideways as investors reassess risk appetite, with no immediate catalyst to break out of the range.
