LONDON — Financial markets entered November already strained by wars, soaring government debt and trade tensions, and now the one force that had kept investors optimistic — a multitrillion-dollar spending boom on artificial intelligence — is starting to show cracks, according to a Reuters analysis published on November 3, 2026.
Illustration: A stock exchange trading floor as falling charts flash on large screens.
The warning lands in a week crowded with market-moving events: Americans voted in midterm elections on Tuesday, November 3, central banks in Britain, Norway, Sweden and Brazil were due to set policy, and traders were still digesting a sharp fall in oil prices and a volatile rebound in technology shares. The analysis argues that those events are not separate stories but parts of a single, more fragile picture — one in which high borrowing costs, heavy debt and a narrow, AI-driven stock rally leave little room for error.
What Happened
Reuters reported on November 3 that signs of trouble are now visible across the world, from a selloff in Japanese and French government bonds to plunging emerging-market currencies. The trigger for the latest bout of nerves, the analysis said, was a sudden October rush out of AI stocks and into safe-haven bonds, after investors began questioning whether the enormous sums being poured into AI infrastructure can generate returns quickly enough.
More than $2 trillion in market value was wiped from the tech-heavy Nasdaq 100 last month, Reuters reported, as Big Tech earnings intensified scrutiny of AI spending. The cost of insuring the bonds of some technology companies surged, some proposed data-centre projects struggled to raise money, and technology stocks from South Korea and China to the United States tumbled.
Investors flocked to bonds instead. Yields, which move inversely to bond prices, fell from multidecade highs, with the benchmark 10-year US Treasury yield falling almost 20 basis points on October 22 — its biggest daily fall since early 2023, according to Reuters. The yield was still hovering around 5 percent, a threshold some investors see as a risk to broader financial stability.
On Tuesday, November 3 itself, markets gave a mixed signal. Reuters' Trading Day column reported a rebound in heavyweight technology stocks that lifted the S&P 500 by 0.4 percent and the Nasdaq by 0.8 percent, while the Dow slipped 0.4 percent. South Korean shares fell 3.6 percent, European shares fell 0.6 percent and British shares fell 1.1 percent, Brazil fell for a sixth consecutive day, oil slipped about 1 percent to near four-week lows and gold fell 0.5 percent, still below $4,000 an ounce. The dollar was little changed, and US long-dated yields rose as much as 7 basis points.
Background
For much of the past two years, AI spending has done much of the heavy lifting for the global economy. Reuters reported that the spending splurge, aided by what it described as Washington's light-touch approach to business, propelled stock markets to record highs and raised expectations for global growth of a healthy 3 percent this year.
Illustration: A huge artificial intelligence data centre under construction, symbolising the sector's vast investment boom.
The scale is extraordinary. The so-called hyperscalers — about half a dozen US technology firms — are poised to invest $1.2 trillion next year in the AI buildout, or as much as all of Europe's companies combined, according to Danske Bank estimates cited by Reuters. That is on top of an estimated $900 billion those firms are forecast to spend this year.
Technology and AI stocks now make up more than 40 percent of the S&P 500 and account for much of the index's 70 percent rise over the past five years, Reuters reported. While the big-cap S&P 500 has lost 3 percent from its early-October peak as investors pulled back from AI, the Russell 2000 small-cap index, whose companies are more sensitive to interest rates, is down nearly 8 percent from its August peak.
"I particularly note the narrowness of the leadership," Societe Generale global strategist Albert Edwards told Reuters, adapting a Winston Churchill quotation: "Never have stocks owed so much to so few."
Without AI spending, some analysts told Reuters, the US economy could already have slipped into recession and dragged others with it, given the surge in energy prices caused by the Iran war. Oil was reported at $105 a barrel, up almost 75 percent so far this year, after months of war disrupted supplies. From Indonesia to the Philippines, some emerging-market currencies have hit record lows as crude costs surged, forcing their central banks to raise rates.
Strains were already showing where the AI buildout has been less of a driving force. In France, bond yields soared to levels last seen during the 2012 euro-zone debt crisis, leaving the government with little room to address demands from protesters who have taken to the streets in the worst civil unrest in years, Reuters reported. In Japan, whose economy depends on energy imports, bond yields recently hit 30-year peaks, putting authorities under pressure to raise rates faster.
"There are some signs of things breaking," Mike Riddell, a lead portfolio manager at Fidelity International, which manages more than $1 trillion in assets, told Reuters, pointing to troubles in France and Australia, where the housing market is in the throes of its worst downturn in decades. German bonds, also considered a safe haven, have become more attractive, he added.
Why It Matters
The analysis matters because it links three risks that are usually discussed separately: inflation, debt and concentration. US President Donald Trump's trade policies and the Iran war's energy shock have revived inflation worldwide, Reuters reported, putting pressure on central banks to raise interest rates. That, along with AI's capital-investment surge and highly indebted governments, is driving borrowing costs to multidecade highs.
Illustration: A central bank building beneath a giant interest rate gauge as borrowing costs climb.
Former Goldman Sachs chief economist Jim O'Neill told Reuters that rising rates have a habit of exposing the most vulnerable borrowers. "Rising rates always seem to sniff out and expose the most vulnerable time after time," he said. "Countries and businesses too exposed suffer the most." He added that if inflation did not ease, the risks from debt-financed AI investment would grow. The US central bank has missed its inflation target for more than half a decade, Reuters noted, while euro-area inflation at 3.8 percent is also above its 2 percent target.
US economist Paul Krugman warned in an October 25 column on Substack, cited by Reuters, that persistently elevated inflation prompting significant rate increases, rising government bond yields and cracks in the AI boom are major concerns for the US economy. "There are troubling aspects of the current economy that could potentially be harbingers of the crisis to come," he wrote.
Sheila Bair, who chaired the US Federal Deposit Insurance Corporation during the 2008 crisis, told Reuters she sees warning signs similar to the run-up to that collapse, including explosive growth in lending by parts of the financial sector whose business model could be threatened by higher rates. "You have a buildup of leverage and AI companies that are relying a lot more on debt now to finance their ambitions," she said, adding that she sees significant fragilities. "I also worry about the lack of fiscal firepower if we have another crisis because we're just so strapped."
Total global debt stands at more than $350 trillion, a record, according to the Institute of International Finance, cited by Reuters — almost three times the size of the global economy. In its July financial stability report, the Bank of England warned that the unpredictable global environment raises the likelihood of additional large global shocks that "could interact with one another, increasing their combined impact." Should that happen, Reuters noted, debt-laden governments would have far less firepower to deal with the fallout than they had in 2008.
There are also reasons for optimism, Reuters stressed. Over the past two years, recession warnings have repeatedly proved wrong, European economic data has proved more resilient than expected, labour markets have been stable, and earnings are strong: 84 percent of S&P 500 companies that had reported third-quarter results so far had beaten consensus estimates, according to LSEG data. A White House spokesperson, Matthew Middleton, told Reuters the Trump administration is committed to maintaining US leadership in AI, fuelling revenue growth and driving productivity.
But the exposure is global. Foreign investors are heavily exposed to the US market, Reuters reported, with their net purchases of US securities jumping to nearly $280 billion in August, a record for a single month, according to the latest Treasury International Capital data. Should AI spending falter, the shockwaves could ripple worldwide, the analysis warned.
What Happens Next
Traders will watch three things in the days ahead. First, the Bank of England's decision on Thursday, November 5: Reuters reported on November 3 that economists polled by Reuters expect the Bank to raise its Bank Rate to 4.0 percent from 3.75 percent, its first hike since August 2023, with British manufacturers starting the final quarter of 2026 with their strongest output growth in more than two years. Sterling was steady at $1.3414 on Tuesday as traders awaited the decision and the US midterm results.
Second, the US midterm election results and what they mean for trade, fiscal policy and the war in the Gulf. Reuters reported that Trump has signalled the US and Israel could restart attacks on Iran after the midterms, a prospect that would keep energy markets on edge. Oil had already plunged more than 7 percent on Monday, November 2, after Tehran said its contacts with the US aimed at ending their eight-month war were continuing, before rebounding on Tuesday as an Iranian official said a deal remained far off.
Third, whether the technology rebound on Tuesday holds or proves to be a pause in a deeper pullback. Tina Fordham, founder and geopolitical strategist at Fordham Global Foresight, told Reuters that fissures among traditional alliances could make it harder for leading economies to coordinate as they did with rescue packages in 2008, and that a 2008-level event now could trigger a global depression. Borrowing billionaire investor Warren Buffett's famous remark about market risks, she said: "The tide is AI" — it is only when the tide goes out, she implied, that the market discovers who has been swimming naked.
For households and businesses, the practical question is simpler: how long borrowing costs stay high, and whether central banks can cool inflation without breaking the AI investment boom that has, for now, kept growth alive.
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FAQ
What did the Reuters analysis on November 3 warn about?
It warned that global markets were already fragile — strained by wars, soaring sovereign debt and trade tensions — and that cracks in the AI investment boom could turn that fragility into a broader shock, because AI spending has propped up both stock markets and growth.
How big is the AI spending boom?
Reuters, citing Danske Bank estimates, reported that about half a dozen US hyperscalers are poised to invest $1.2 trillion next year, on top of an estimated $900 billion this year. Technology and AI stocks make up more than 40 percent of the S&P 500.
Why are rising interest rates so important to this story?
Higher rates raise borrowing costs for governments, companies and households, expose the most indebted borrowers, and make it harder to finance AI data centres and other large projects with debt — while also threatening to cool growth if central banks tighten too far.
What happened to markets in October and on November 3?
In October, more than $2 trillion in market value was wiped from the Nasdaq 100 as investors sold AI stocks and bought safe-haven bonds. On November 3, technology shares rebounded, lifting the S&P 500 by 0.4 percent and the Nasdaq by 0.8 percent, while South Korean, European and British shares fell and oil and gold slipped.
What should readers watch next?
The Bank of England's rate decision on November 5, the results and policy consequences of the US midterm elections, oil prices and the Iran war, and whether the AI stock rebound holds or fades in the coming weeks.
Sources
Reuters, "Global markets were already fragile. Big AI bets could break them," November 3, 2026; Reuters, "Dollar under pressure as oil prices slump, Australia rate decision awaited," November 3, 2026; Reuters, "Trading Day: AI trade rebounds, midterms awaited," November 3, 2026; Reuters, "Sterling steady as traders await BoE, nervously watch midterms," November 3, 2026; Reuters, "FTSE 100 slips as inflation fears build on oil rise," November 3, 2026.
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