Tech Rebound Tests If AI Optimism Has Found Floor

Strong CoreWeave results and talk of a higher Anthropic IPO valuation have pulled investors back into US technology stocks. The harder questions about financing and politics remain unanswered.

A rally built on two data points

US technology stocks were set to extend their rebound on Wednesday, as strong results from AI cloud provider CoreWeave and reports that Anthropic may raise its IPO valuation gave investors a reason to return to a sector many were abandoning only a week ago.

Futures tracking the Nasdaq 100 rose 1.9 per cent during European trading. If that move holds, the index, already up 2.8 per cent this week, would come close to recovering the 4.9 per cent it lost last week, a decline that included its worst single session since 2020. S&P 500 futures gained 0.9 per cent, while Europe was more restrained, with the Stoxx 600 up 0.3 per cent and the FTSE 100 up 0.4 per cent.

The central question is whether this is a recovery grounded in evidence or a relief rally driven by two pieces of good news. The distinction matters because last week's sell-off was not caused by a single disappointment. It reflected broader doubts about how the AI build-out is being financed, combined with sharper political risk following the midterm elections.

CoreWeave, which rents Nvidia-powered computing capacity to AI developers, reported third-quarter revenue of $3.66bn on Tuesday. That was up 168 per cent on a year earlier, ahead of analyst estimates of $3.55bn and above the top of the company's own guidance range of $3.45bn to $3.60bn. It raised its full-year revenue forecast to between $13bn and $13.3bn, and its revenue backlog, the value of contracted work not yet delivered, rose to $132.5bn from $104bn at the end of June. The shares rose more than 17 per cent in pre-market trading.

At the same time, the Financial Times reported that Anthropic's bankers were considering raising the company's IPO valuation to $1.5tn or more in the coming days. Nvidia added 4 per cent before the open, recovering part of Tuesday's 5.5 per cent fall, which followed a controversy involving its chief executive.

The figures behind the rebound. Sources: Financial Times; CoreWeave; Benzinga; Reuters; CNBC.

Why CoreWeave carries more weight than its size suggests

CoreWeave is not among the largest technology companies, but it has become a proxy for one of the market's main concerns: whether debt-funded AI infrastructure can generate returns before the bills fall due.

The business model is simple to describe and demanding to execute. CoreWeave borrows heavily to buy chips and secure data centre power, then leases that capacity to AI developers on multi-year contracts. Revenue arrives only once capacity is built and switched on, while interest costs begin much earlier. That timing gap explains why its shares had almost halved since the start of October, as investors questioned how much risk sat on its balance sheet.

The third-quarter figures show both sides of that model. Operationally, revenue rose by more than $1bn from the previous quarter, and the company said adjusted operating margins reached double digits a quarter earlier than planned. Financially, the net loss widened to $709m from $110m a year earlier, and interest expense climbed to $846m from $310m. The company expects fourth-quarter interest costs of between $1.05bn and $1.15bn, and total debt stood at about $47bn at the end of September.

Management argues that contracted cash flows will be sufficient to service and repay its borrowings. It also says it will not use the unsecured debt market at current yields, relying instead on secured lending and customer prepayments. That is a coherent strategy, but it depends on customers continuing to honour and expand their commitments. A backlog is a contractual promise, not cash in the bank.

Anthropic's possible valuation increase matters for a related reason. A successful listing of a frontier AI developer at $1.5tn or more would give public investors a direct price for the companies whose spending supports CoreWeave and Nvidia. It would also reinforce the financing chain that strategists say is sustaining the AI trade. Roger Lee, head of equity strategy at Cavendish, told the FT: "As long as the financing is there, the trade can continue."

The context, however, cuts both ways. Anthropic was valued at $965bn in a private funding round in May, and earlier reports pointed to an IPO valuation of around $2tn before investors discussed a lower figure of about $1.5tn in October. A move back above $1.5tn would signal recovering appetite, but it would be a revision within a range that has already fallen once.

What the rebound does not settle

The prevailing reading on Wednesday was that strong results have restored some confidence. Deutsche Bank analysts said CoreWeave's numbers were reducing doubts about the AI cycle and lifting optimism more widely. The revenue figures support that view, but it should not be stretched too far.

First, one company's quarter does not resolve the sector-wide question of whether returns will justify the spending. CoreWeave's growth is evidence of strong demand for computing capacity today. It is not yet evidence that the customers buying that capacity will earn enough to keep paying for it at the same scale.

Second, the political risk behind last week's exodus has not changed. The Democrats' gains in congressional and gubernatorial races raised concern that the party may try to slow the construction of data centres. Any new constraints on power use, planning or grid access would affect precisely the capacity that underpins CoreWeave's backlog. Nothing in Tuesday's results addresses that.

Third, positioning remains unsettled. Pictet's Arun Sai described investors as torn between treating the sell-off as a generational buying opportunity and fearing a value trap. Caroline Shaw of Fidelity International, who took profits in October, framed the debate as one about when to rotate back into technology rather than whether the cycle is ending. Both views point to sentiment that is fragile and highly reactive to news flow, which is what produces rallies of this speed.

The evidence therefore supports a narrower conclusion than the market move implies. Demand for AI infrastructure remains strong, and CoreWeave is executing against it. Whether that demand can be financed at a sustainable cost, and whether Washington allows it to be built at the planned pace, are still open questions.

The next test arrives quickly. Anthropic's final IPO pricing will show whether public investors will pay the valuation its bankers are now contemplating, and it will establish the first market price for a frontier AI developer. If the listing prices strongly and trades well, it will strengthen the financing case behind the whole trade. If it disappoints, this week's rebound may prove to have been a pause rather than a turn.