WS #16336

The dominant market narrative has shifted decisively toward a tech-led selloff, with Meta serving as the primary casualty. Meta stock plunged 6% as its AI capital expenditure surge pushed free cash flow into negative territory, triggering a spike in credit default swap spreads to all-time highs. This development escalates the 'AI profitability' debate, validating bearish concerns about margin compression in the face of massive infrastructure build-outs. The selloff is broadening beyond Meta, with JPMorgan reporting the high-yield AI basket (CoreWeave, Nebius, IREN) trading at all-time wide credit spreads, signaling systemic stress in the AI infrastructure credit market. Simultaneously, geopolitical tensions are escalating, with Saudi Arabia issuing a hostile threat alert in the Najran region and Trump accusing Iran of staging fake attacks to manipulate oil prices. This geopolitical friction is supporting oil prices, which have hit a five-month high, creating a divergent environment where energy beneficiaries face headwinds from higher global growth concerns and airline/shipping costs. The Nasdaq plunged over 2%, driven by the rotation out of high-multiple tech and into defensive or value plays, while European indices like Poland's WIG30 also declined. In corporate news, significant M&A activity includes LSEG's confirmed $3.5 billion acquisition of Octus, marking a substantial premium over Permira's 2022 entry. Conversely, Fireblocks has explicitly denied rumors of a $2.5 billion acquisition by Visa, which would have represented a massive discount to its $8 billion valuation. On the regulatory front, Meta faces a historic $25 billion fine in New Mexico, compounding its credit concerns. Meanwhile, Tesla's stock dropped on reports of spending cuts that raise questions about its AI and robotics roadmap, further dampening sentiment around high-growth tech narratives.