Growth stocks are experiencing their biggest drawdown since the Liberation Day tariff debacle.
Multiple themes are experiencing a waterfall sell-off, including data center operators, rare earths, SMRs, and speculative AI names associated with the AI buildout. With less aggressiveness, quality names across semiconductors are also suffering a significant correction.
Inflation is back, as oil prices have surged after supply chains were disrupted by the war in the Middle East.
As the Fed, controversially, hikes rates to temper aggregate demand and control inflation, the already-doubted financing feasibility of the AI buildout becomes even more challenging.
Investors are full of questions, and sometimes, the past can offer valuable answers. While we’re in a unique situation, undergoing the largest infrastructure buildout in human history, we’ve experienced similar drawdowns in the past, driven by very similar causes.
In this article, I’ll analyze when this market could bottom, based on how major oil shocks since the 1970s ended and what could happen from here.
Then I’ll get into what this means for growth stocks, using the 2021–2022 crash as another example of a more recent inflation-related drawdown that slowed down many infrastructure projects and helped push the US into a technical recession in 2022.
Hopefully, after this analysis, it’ll be clearer where we stand today and what to expect over the coming months.