Global stocks fall as rate fears and AI debt worries build before SpaceX IPO

Global equities came under pressure Monday as oil rose and technology shares weakened ahead of SpaceX’s planned IPO, according to Fortune. The move put a crowded AI trade under fresh scrutiny as investors weighed stronger U.S. hiring, higher-rate risk and a new wave of tech fundraising.

Fortune reported that renewed fighting between Iran and Israel helped push Brent crude to $97 a barrel. UBS economist Paul Donovan said there appeared to be “no single cause” for the selling, pointing instead to a broader rise in perceived risk.

U.S. stocks had already fallen sharply Friday, Fortune reported. The S&P 500 dropped 2.64%, the Nasdaq lost 4.18% and the Philadelphia Semiconductor Index fell 10.26%, while the VIX fear gauge rose 24% over five days.

Overseas markets also weakened, according to Fortune. The Stoxx 600 was down 0.75% in early European trading, the FTSE 100 lost 0.4% before lunch, South Korea’s KOSPI fell 8.29%, Japan’s Nikkei 225 dropped 3.85%, India’s Nifty 50 lost 0.9% and China’s CSI 300 declined 2.14%.

Jobs data changed the rate debate

Fortune reported that Friday’s U.S. payrolls report showed 172,000 jobs added in May, far above expectations of about 88,000. Pantheon’s Samuel Tombs and Oliver Allen wrote that they “didn’t see this coming,” adding that payrolls had beaten consensus forecasts for three straight months.

Pantheon said the three-month average for private payrolls had climbed to 166,000 from 8,000 in February, according to Fortune. Vanguard had forecast only 20,000 new jobs, Fortune reported.

Fortune said many Wall Street analysts now view further Federal Reserve rate cuts as unlikely, with several expecting rate increases later this year. The concern is that stronger growth, combined with inflation at 3.8% and unemployment at 4.3%, could make the Fed more cautious; a new consumer price index reading is due Wednesday, Fortune reported.

AI financing faces a test

The pressure on technology shares comes as investors examine how much money the AI buildout is demanding. Fortune reported that Google issued $85 billion in new stock last week, while the Financial Times reported that Meta was considering a similar move.

Meta and Oracle have also raised billions in private debt for AI data center projects, Fortune reported. Bank of America’s Yuri Seliger told clients that hyperscaler debt supply had reached $159 billion so far this year, equal to 91% of the bank’s $175 billion full-year forecast and above roughly $121 billion last year.

ING’s James Smith said attention is growing on the “circularity” of the AI economy, with a small group of companies raising money, buying chips, leasing computing capacity and booking revenue from one another, according to Fortune. Smith said U.S. private non-residential investment outside AI has fallen year over year for six straight quarters.

ING’s James Knightley also found the jobs report was narrow, Fortune reported. He said gains were concentrated in leisure and hospitality, government, and private education and health care services, with only 10,000 jobs created outside those areas.

SpaceX offering looms

Fortune reported that SpaceX, Anthropic and OpenAI are all expected to go public this year, with SpaceX’s IPO planned for Friday. Fortune said SpaceX is not profitable and that Anthropic and OpenAI are not expected to be profitable either.

Bank of America’s Michael Hartnett warned that headline inflation could rise above unemployment this week, Fortune reported. Hartnett said that has happened only six times since 1960, in years associated with Fed rate increases and difficult periods for Wall Street.

This story draws on original reporting from Fortune.