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Market Outlook

Global sell off in risk assets nears tipping point

ADMIN || 6th February 2026

Contagion risk is rising as the unwind of momentum trades is increasingly weighing on broader risk sentiment with traders rapidly repricing AI-tailwinds and digital future.

Anything that screens as AI-adjacent or disrupted is being hit, and the narrative weighed heavily enough to give Treasuries a strong bid Thursday, although data pointing to weakness in the job market helped.

The moves are still a rotation, not a clean risk-off event, since the macro backdrop on the economy hasn’t changed. But Thursday’s price action is worrying, as seen in the continuation of software tech and AI-adjacent names declining further, made worse by the rout in the crypto space, bringing into question what value digital assets have whether through software or blockchain.

The main catalyst remains the flip in the AI narrative. Investors started the year hunting for AI winners. Now the market is dumping AI disruption losers with Anthropic’s agent wracking up another victim there Thursday, bringing into question the future cash flows and headcounts of financial service firms.

At the same time, hyperscalers’ capex continues to go parabolic. Alphabet and Amazon coming in with much higher forecasts, casting doubt on assumptions about the future path to returns on that investment. So much money being thrown at infrastructure development, meanwhile, is also raising execution risk for the entire AI investment cycle as there’s only so much physical resource, power and labor available.

The complex is now being divided up into two buckets. AI capex spenders, where the balance sheet and cash flow burden is rising, and AI disrupted, where the revenue model gets questioned. That sorting is driving the extreme factor dispersion rocking profit and losses.

The risk is that the AI shock stops being an equities story as disruptions and capex spending hit balance sheets and loan books. Credit is the transmission channel everyone ignores until they can’t and ripples showing there are important.

Bank of America recently highlighted in a note that only 1.7% of investment grade notional is directly affected, a small amount until you look at where the beta sits. BDCs and leveraged loans are the high-octane conduit, and in a recent note, Barclays is explicit that the spillover from software to private credit is real. That’s the bridge from factor stress to cross-asset deleveraging and will be increasingly where markets take their cue on risk appetite.

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