Janus Henderson macro chief Richard Bernstein says the AI stock sell-off could lower borrowing costs for small caps. The Federal Reserve is tightening, he argues, and speculative stocks are taking the first hit.
A major chip ETF closed last Thursday nearly 14% below its October high, which many investors read as a warning. However, Bernstein told CNBC the sell-off also reprices capital in a healthy way.
Could the AI stock sell-off make money cheaper for everyone else?
Bernstein says capital has flowed to the AI data center industry on easy terms while other companies went short.
If valuations adjust across the rest of the market, borrowing becomes cheaper for the wider economy, he said.
He pointed to small caps, which gained over several recent sessions as long-term rates fell. However, the CNBC host noted they were still down on the week.
He also cited credit default swap (CDS) spreads, a default-risk gauge, as a sign of profit doubts. Meanwhile, chip stocks fell for eight straight sessions, a 16-year record, fueling debate over whether the AI bubble is cracking.
Can anything outside AI escape a Fed that means it?
Many investors expect a single hike, he said, a view he rejects. The Fed raised rates by a quarter point on Sept. 16, its first increase since 2023.
He cited hot consumer, producer, and import price readings as evidence of a genuine inflation problem.
Core import prices are rising faster than core consumer prices, a reversal of the past 30 years, he said.
“The United States is now importing inflation.”
Richard Bernstein, global head of macro at Janus Henderson, told CNBC.
Consumer staples, makers of household goods, are performing a little better, which he reads as recession fear entering markets.
In contrast, economist Peter Schiff argues most US stocks are in a bear market. Goldman Sachs data puts the median S&P 500 stock 16% below its peak.
Bernstein concedes a broader market may not help data centers or tech. Still, he expects the long-term story to sit outside the leadership of the past two to three years.
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