pfp Advisory: “The New Skepticism Toward AI Stocks”

Fund manager Christoph Frank explains why the new interest rate cycle is changing the rules of the game in the capital markets and what risks and opportunities this presents for investors.

November 9, 2026. FRANKFURT (pfp Advisory). From October 6 through November 5, the Nasdaq Composite lost just under 12% based on closing prices. The technology-heavy stock index fell below the interim low it had reached in July, trading at its lowest level since April, and—to use standard stock market jargon—was in a correction due to its double-digit percentage loss. This is all the more remarkable given that the German stock indices remained stable during the same period: The DAX (both in its standard performance version and as a more comparable price index) gained about 3%, the MDAX around 1%, while the SDAX declined only slightly. Are we currently witnessing, first, a bursting bubble among major U.S. tech stocks and/or, second, among AI stocks in general, and/or, third, a certain decoupling of the German market?

Apparently, investors are no longer viewing the AI boom quite so uncritically. More and more, they are wondering whether the massive AI investments by U.S. Big Tech companies will ever pay off. New data centers, high-performance chips, servers, networking equipment, and power supplies are gobbling up billions. In contrast to these massive investments, recurring revenue has so far often grown at a significantly slower pace. While the “hyperscalers” have been veritable cash machines in recent years, the aggregate free cash flow for Microsoft, Alphabet, Amazon, Meta, and Oracle actually turned negative in the first nine months of 2026. Borrowed capital must be used with increasing frequency, making the financing of the AI boom increasingly risky—especially with rising capital market interest rates and a slightly less accommodative monetary policy. Additional pressure arose from the Democrats’ sweep in the U.S. midterm elections—which was initially expected and then actually occurred—and which could call many data center projects into question and lead to stricter regulation.

Given all these uncertainties, many investors likely couldn’t resist taking profits—either in full or in part—on the gains they had previously accumulated from AI stocks. Incidentally, this is by no means limited to the U.S. On the Chinese stock market, the AI correction has already turned into a bear market. Since the end of June, the STAR 50 Index has roughly halved in value. This index—a sort of Chinese “Nasdaq 100”—comprises 50 large and liquid companies listed on the Shanghai “STAR Market,” primarily from the semiconductor, chip manufacturing, electronics, and industrial technology sectors. Further examples: The closely watched South Korean memory chip manufacturers Samsung and SK Hynix each lost roughly 30% during the period in question (October 6 to November 5), as did the Japanese chip testing equipment manufacturer Advantest; the Japanese memory manufacturer Kioxia lost even more than 50%.

But are these sharp price declines the beginning of a larger crash? I wouldn’t rule that out, but it’s not my preferred scenario. However, many a naive investor who dreamed of an eternal investment boom in AI could still learn some hard lessons in the coming months. Some AI companies that are all the rage today will be bankrupt in a few years. Companies that have pulled off particularly bold financing deals have poor chances of survival. The fundamental demand for computing power and AI applications, on the other hand, will remain. It’s likely that many investors will soon adopt a more “mature” and less euphoric view of AI companies, in which traditional valuation metrics and key figures will once again take center stage—much like after the dot-com bubble at the turn of the millennium.

Finally, regarding the third question—whether the German stock market will succeed in decoupling itself from its U.S. counterpart—it could very well be that Germany’s disadvantage of not being particularly exposed to AI turns out to be an advantage in the short term. There are hardly any companies with strong AI ties in German stock indices. Since not much “hot air” (in terms of valuations) was pumped into them to begin with, there isn’t as much to let off the steam. In this respect, it is conceivable that some recently neglected segments (e.g., German small-cap stocks from traditional SME sectors) could catch up in the future if capital fleeing the major Big Tech companies seeks out new targets. However, it is currently impossible to predict whether this reorientation will occur in a rising, stagnant, or crisis-stricken overall market. Regardless, the basic “rule” that Frankfurt catches a cold when New York coughs is likely to hold true even after an AI crash. After all, Germany is and remains deeply intertwined with—and thus dependent on—the global economy—and, due to its underdeveloped capital market, also on the world’s leading stock exchange.