Potential diplomatic progress in the Middle East offers relief to energy markets, but concerns over AI returns, high borrowing costs and stretched valuations continue to weigh on US technology stocks.
Global markets are reassessing geopolitical risks following reports of possible negotiations between the United States and Iran. Hopes of de-escalation have pushed oil prices lower as investors unwind some of the geopolitical risk premium built into crude. However, the improvement in sentiment has yet to translate into a sustained recovery in US equities, where concerns over technology valuations and the commercial returns from artificial intelligence investments remain dominant.
US equities are heading towards a fourth consecutive session of declines, with the Nasdaq trading around 11% below its early-October peak. The pressure reflects growing investor scrutiny of the massive capital expenditure by technology companies on data centres and AI infrastructure. Markets are increasingly asking whether these investments can deliver adequate returns through stronger profitability, free cash flow and sustainable monetisation.
Recent earnings reactions from major technology companies have reinforced these concerns. Investors are moving beyond AI adoption announcements and infrastructure spending plans to demand clearer evidence of commercial outcomes. Elevated US Treasury yields are adding to the challenge by reducing the present value of future earnings, particularly for technology companies trading at high valuations.
“The immediate challenge for equities remains the combination of elevated yields and growing doubts about AI monetisation.”
— Daniela Hathorn, Senior Market Analyst, Capital.com
Precious metals are also struggling to recover after October’s sharp selloff. Silver has slipped below $50, losing approximately 20% over the past month, as higher real yields, dollar strength and broader market deleveraging weigh on prices. Although gold and silver rebounded on Monday as oil prices and Treasury yields eased, the recovery remains fragile. Geopolitical uncertainty is not automatically translating into safe-haven demand when investors are also concerned about restrictive monetary policy and liquidity pressures.
The US midterm elections introduce another source of uncertainty, particularly for the dollar, Treasury yields and sectors exposed to fiscal and regulatory policy. Investors will assess whether the results influence expectations around government spending, borrowing and the administration’s ability to advance its economic agenda.
A potential diplomatic breakthrough in the Middle East could offer further relief by reducing energy prices and inflation expectations. However, lower oil prices alone may not be enough to restore confidence in technology stocks. The market’s focus is increasingly shifting towards whether AI investments can generate measurable financial returns, with earnings visibility and valuation stability likely to determine the next direction for US equities.
