Markets tumble worldwide as Fed resets expectations: $400 billion wiped off SpaceX stock
The Fed just repriced the cost of money. Three rate hikes are now on the table before year-end — if Bank of America is right — and SpaceX erased $400 billion in market cap in a single session.
Rate Reset Hits Tech First
The trigger was new Fed Chair Kevin Warsh's first policy statement. Hawkish tone. The policy rate sits at 3.5%. BofA's Aditya Bhave now forecasts three 25bp hikes — September, October, December — taking the target range to 4.25–4.5%. Most analysts, until yesterday, expected the Fed to hold.
The arithmetic is straightforward. Higher rates compress equity valuations weighted to cash flows 5–10 years out. AI hyperscalers sit at the front of that line. Barclays estimates $200 billion in new debt issuance from hyperscalers this year to fund AI capex. That debt becomes more expensive to service and roll.
- S&P 500: -0.37% on the session
- SpaceX: -16.43%, $400 billion wiped (FT)
- SpaceX share price: $154.60 — still 14.5% above the $135 IPO
- Prior consensus: Fed on hold through 2026
The Unprofitable Trade Unwinds
Apollo's Torsten Sløk flagged the setup: companies with negative earnings have outperformed those with positive earnings over the trailing 12 months. That trade works when discount rates fall and risk appetite is unconstrained. It breaks when the discount rate rises.
For builders, the read is direct. Companies that closed rounds at 2024–2025 multiples on the assumption rates would normalize lower now carry mark-to-market risk on secondaries and tender offers. Burn multiples that looked acceptable at a 3.5% policy rate look different at 4.5%. Sløk's diagnosis: "Something is broken in price discovery."
Tactical Watch List
- Secondary pricing. Discounts on private rounds are the cleanest read on whether institutional buyers believe the rate story. Watch the gap widen.
- Debt-funded capex. Any AI-infrastructure operator relying on incremental debt issuance faces a higher bar. Pre-fund the runway or cut burn now.
- Strategic divestitures. Reuters reports Yum selling Pizza Hut in two transactions totaling $2.7 billion, with LongRange taking the U.S. business at $1.5 billion. Sellers are repricing fast. Buyers carry leverage.
A tail risk sits on the side: the Strait of Hormuz saw 30+ ship transits in 24 hours Monday, the highest volume since the war began, but Iran is now demanding route compliance and a new Persian Gulf Strait Authority requires approved insurance for passage. Energy supply remains an unpriced input.
Verdict
The free-money era just paused — or ended, if you trust BofA. The repricing has further to run. Cut burn. Lock capital. Price rounds to the new reality.
