Oklo, Ionq, Coreweave, Bloom Energy... Over the past month, these "quantum, AI, energy" speculative stocks have already "collapsed."

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The frenzy around speculative themes such as artificial intelligence, quantum computing, and new energy is cooling rapidly.

Since mid-October, speculative stocks including nuclear energy company Oklo, quantum computing firms IonQ and D-Wave Quantum, AI infrastructure provider CoreWeave, and energy technology company Bloom Energy have seen their combined market caps drop by about 33%.

Behind the market’s shift is the start of the third quarter earnings season. As companies begin to release solid results, investors are reassessing the lofty valuations of companies whose profitability is questionable or even irrelevant.

According to FactSet data, up to 82% of S&P 500 companies have beaten earnings expectations, driving capital into fundamentally sound value stocks.

More importantly, even tech giants like Oracle have come under market scrutiny over their ability to service debt due to their exposure to “cash-burning” customers—a signal that ended the market’s pricing fantasy that everything will be perfect for small firms on the sidelines of the AI ecosystem.

Speculative Frenzy’s Sudden Halt

The group of 13 stocks comprising Oklo, D-Wave Quantum, CoreWeave, IonQ, Nebius, Cipher Mining, IREN, Rigetti Computing, Tempus AI, POET Technologies, Bloom Energy, Plug Power, and SoundHound AI has fallen by an average of one-third since October 14.

Previously, from early July to mid-October, these stocks saw remarkable performance, with an average gain close to 200%. But the peaks occurred right around the start of the third-quarter earnings season. According to FactSet’s John Butters, 82% of S&P 500 companies beat profit expectations and 77% surpassed revenue forecasts.

This stark contrast prompted investors to rethink their capital allocation logic. When fundamentals-based large companies broadly deliver stellar results, chasing speculative stocks with little earnings power becomes increasingly hard to justify.

Capital flows in the market confirm this shift in logic.

Since the speculative stocks peaked, the iShares MSCI USA Value Factor ETF (VLUE) is up about 6%, outperforming the S&P 500 during the same period. This shows investors are pivoting away from high-risk, narrative-driven investments toward fundamentally sound value investing.

Credit Crisis in the AI Ecosystem

The most critical turning point is that credit risks are beginning to show in the AI sector.

Oracle’s stock price surged after revealing large future demand, but when it disclosed that these orders came mainly from OpenAI, the stock not only gave up all its gains but also saw its credit default swap spreads widen—investors no longer regarded its debt-servicing capability as fully safe.

Oracle’s challenge is that to fulfill orders from a customer burning huge amounts of cash with multi-billion-dollar spending commitments, it needs to invest in multi-year capital expenditures to build infrastructure. This exposure is now raising market concerns.

The market’s risk repricing is becoming increasingly nuanced.

According to Bloomberg, investors demanded higher coupon rates for Applied Digital’s bond issuance compared to similar deals from Terawulf and Cipher Mining, because the latter two have support from Google, while Applied Digital relies on CoreWeave as its main tenant.

When a company’s survival and growth depend on another similarly high-risk startup, investors demand a higher risk premium.

Risk Warning and DisclaimerThe market has risks, and investments require caution. This article does not constitute personal investment advice, nor does it take into account individual users’ specific investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions herein fit their particular circumstances. Any investment based on this is at your own risk. ```