AI Sector Wobbles Amid Inflation Fears, Driving Investors to Defensive Plays

Global markets opened Friday with a cautious tone, reflecting a deepening divergence between an embattled artificial intelligence (AI) sector and a flight to safety in traditional assets. Strong US wholesale inflation data reignited concerns about the Federal Reserve's monetary policy path, even as major equity indices posted modest gains. Meanwhile, the cryptocurrency space navigated new regulatory frameworks and ongoing security challenges.

Stocks and bonds

US equities closed mostly higher on Thursday, with the Dow Jones Industrial Average gaining 1.08% to 52,177.69 and the S&P 500 rising 0.33% to 7,744.06. The Nasdaq Composite, heavily weighted towards technology, saw a more modest increase of 0.08% to 26,713.03, reflecting underlying pressure in the tech sector. The FTSE 100 in London also advanced 1.08% to 10,840.35.

However, the broader narrative for tech, especially AI-related stocks, remained challenging. Reports of distressed credit default swaps for CoreWeave and renewed pressure on chip stocks like Nvidia, driven by concerns over Anthropic's financial progress, contributed to a 'tech wreck' sentiment. Some analysts view Tesla's flying car demonstration as an engineering feat rather than a commercially valuable innovation, adding to the sector's mixed signals. Despite this, CoreWeave's stock rebounded amid sharply divided Wall Street opinions on AI spending, and experts advised selective bargain hunting in tech.

Investors responded to the tech selloff by rotating into perceived safer assets. Big pharma stocks, including AbbVie, Eli Lilly, and Gilead Sciences, closed near all-time highs. The yield on the US 10-year Treasury note fell by 1.95% to 5.09%, indicating increased demand for government bonds. This movement suggests a defensive posture among investors, seeking refuge from the volatility in growth-oriented tech.

Macroeconomic data reinforced expectations for continued hawkishness from the Federal Reserve. US wholesale prices jumped 6.3% annually in September, marking the biggest gain since 2022 and exceeding economists' forecasts. This hot Producer Price Index (PPI) report led some economists to warn that the Fed's work is not done, with real risks of another rate hike in two weeks' time. The US Treasury, however, dismissed the IMF's debt warning, even as US debt exceeds $40 trillion.

In Africa, Nigeria's equity market extended its rally for a second day, with the NGX gaining N21.74 billion, lifted by shares of Aradel and Oando. Fitch Ratings revised outlooks for nine Nigerian banks and two bank holding companies to Positive, citing improvements in the country's economic policy framework and foreign exchange reserves. South African billionaire Johann Rupert's Richemont is reportedly in talks to join a $1 billion bid for diamond mining giant De Beers.

Currencies and commodities

The US Dollar Index declined by 0.71% to 101.82, while the euro gained 0.40% against the dollar, trading at 1.1240. The British pound also strengthened against the greenback, with GBP/USD rising 0.54% to 1.3302. This broad dollar weakening comes despite the hawkish implications of the latest US inflation data.

In commodities, gold surged by 2.32% to $4,203.10, benefiting from the flight to safety amid market uncertainty and a weaker dollar. Crude oil prices saw a modest increase of 0.60% to $95.66 per barrel. An analyst noted that the 'real' price of oil could be $30-$40 higher due to surging tanker rates, indicating significant delivery costs.

Nigeria's foreign exchange demand reached a 15-year high of $18.34 billion in the second quarter of 2026, driven primarily by services and financial payments rather than merchandise imports. Nigerians also spent $1.44 billion on foreign education in the first half of 2026, a 3.51% increase year-on-year. The country's energy inflation more than doubled to 10.85% in September, intensifying price pressures.

Crypto

The cryptocurrency market saw mostly positive, albeit small, movements. Bitcoin gained 0.43% to $81,913.97, Ether rose 0.63% to $2,433.53, and Solana climbed 0.89% to $105.00. XRP fell slightly by 0.02% to $1.330, and BNB dipped 0.27% to $727.30.

Regulatory developments continued to shape the crypto landscape. MSCI adopted index exclusion rules that could impact crypto treasury firms like Strategy, Metaplanet, and Upexi, with a final list due in November. Australia released a draft bill to adopt the OECD's crypto tax reporting framework, aiming for international data exchanges by 2028. Russia's central bank confirmed a ban on peer-to-peer Bitcoin trading effective July 1, 2027, mandating trades through approved brokers or exchanges.

Binance.US is reportedly seeking a $1 billion valuation in a potential $100 million funding round to regain market share. Meanwhile, a scammer reportedly lost $4.8 million stored on tampered Ledgers, highlighting ongoing security risks. On the innovation front, Google announced a significant breakthrough in quantum computing with its Willow chip, cutting errors 40x on 'magic states,' a step towards more powerful machines. BlackRock CEO Larry Fink warned that a halt in AI data center construction could tip the US into recession, underscoring the critical role of infrastructure spending.

What to watch

• The Federal Reserve's next policy meeting in two weeks, following the hot PPI data.
• Further developments in the AI sector, particularly regarding CoreWeave's financial health and investor sentiment towards chip stocks.
• The final list of crypto firms to be excluded from MSCI indices, due November 11.
• Any new policy statements from the vacant digital assets office at the White House following Patrick Witt's departure.
• Ongoing discussions regarding the $209 billion funding gap for Black-owned businesses in Nigeria, South Africa, and other African nations.