Chart - AI Stock Plunge Triggers Market Alert. Here’s What Traders Are Watching

Updated the report released on Friday night, all price information in the article has been updated.

Harry Robertson/Dhara Ranasinghe

Reuters London, Nov 9 - The plunge in technology stocks (link) and waning confidence in artificial intelligence (AI)-related stocks (link) are set to put the resilience of global financial markets, from New York to Taipei, to the test.

Although the tech-heavy Nasdaq 100 Index .NDX rose by more than 1% last Friday, it is still down 5% this week, and traders remain on edge.

Policymakers have long warned (link) of the risks if the AI boom were to burst. Investors and regulators are closely monitoring market stress indicators, some of which have started flashing yellow, though not yet red.

Below are the latest readings on several key indicators:

Rising fear sentiment

Wall Street’s so-called “fear gauge”—the VIX index .VIX, which measures volatility in the U.S. stock market—climbed above 28 on Thursday, the highest since late March. It closed slightly above 25 on Friday.

The increase was relatively modest compared to the post-“Liberation Day” market surge in April 2025 and the market sell-off in August 2024.

Nevertheless, the VIX index surged more than 30% last week.

Europe’s equivalent volatility index also hit its highest level since May on Friday .V2TX.

“It’s still early days,” said Idanna Appio, portfolio manager at First Eagle Investments. “What worries me is if volatility spikes further, market stress intensifies, and market access actually becomes an issue. Those would be the things I… would focus on most.”

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Guarding against turmoil in the tech sector

Perhaps the biggest sign of potential risks in the AI sector is the surging cost of insurance protection against debt defaults (link).

The cost of debt insurance issued by cloud start-up CoreWeave CRWV.O has soared to “distressed” levels, with its five-year credit default swap (CDS) spreads jumping above 1,000 basis points, an all-time high. This has become a barometer for measuring investors' worries about the AI space.

https://www.reuters.com/graphics/COREWEAVE-BONDS/klvyragxapg/chart.png

CDS spreads for SpaceX SPCX.O and Intel INTC.O also spiked last week.

As appetite for high-risk assets has cooled .MERH0A0, the premium investors demand to hold U.S. high-yield corporate bonds—also known as junk bonds—has risen to the highest level since the turmoil during “Liberation Day.”

According to ICE Bank of America indices .MERH0A3, in the riskiest sector of the market—companies rated CCC or lower—the premium is now near its highest level since 2020.

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Investors seeking safe havens

Although daily market swings remain mostly calm, the flow of funds into safe-haven assets is a clear sign of rising market anxiety.

Driven by high debt, rising inflation, and increased bond issuance from tech companies US10YT=RR, competition for capital has intensified (link), causing the yield on the U.S. 10-year Treasury note to fall 50 basis points from a peak above 5% last month.

The foreign exchange market is relatively muted, but there are signs of investors seeking safety in the U.S. dollar. On Friday, the dollar rose nearly 0.8%, its biggest one-day jump since June =USD.

On Thursday, the three-month euro cross-currency basis swap (the relative premium for exchanging euros into dollars) briefly touched minus 8 basis points, the lowest since the end of 2023, indicating higher demand for dollar funding. By Monday, that indicator had recovered to around minus 3.5 basis points EURCBS3M=PMID.

Bank of America’s “Flow Show” report released Friday showed that, in the week ending Wednesday, money market funds had net inflows of $140 billion—its seventh-highest level on record.

https://www.reuters.com/graphics/USA-BONDS/dwpkmxazwpm/chart.png

Bond market performance

So far, signs of market stress in the bond market have not approached those seen during the pandemic or the “Liberation Day” tariff shock.

The closely watched MOVE index—which tracks volatility in the U.S. Treasury market—hit a six-month high in October but has since fallen back .MOVE.

https://www.reuters.com/graphics/USA-BONDS/zgvodormypd/chart.png

Other bond market indicators, such as U.S. interest rate swap spreads, which can reflect funding and liquidity strains, have also remained steady US10IRS10Y=RR.

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