A column by money expert Victoria Devine has raised alarms about young Australians piling into AI stocks, just as a week-long rout wiped more than $1 trillion from the world’s biggest semiconductor and AI companies. While shares quickly rebounded, Devine warns that the sector’s reliance on debt and its susceptibility to interest rate rises could trap investors who need their money for long-term goals.
Writing for The Age and other Nine newspapers, retired financial adviser Victoria Devine warns that the allure of high-profile tech IPOs and record levels of Australian investing are converging with dangerous market dynamics. She notes that CoreWeave, which debuted in March 2025 and reached a $US90 billion market cap by June 2025, has seen its valuation shrink to $34 billion as its debt rose from $30 billion to $52 billion, leaving its bonds at distress levels.
Deutsche Bank’s head of FX research, George Saravelos, told investors that the current AI spending pace is unsustainable, warning that “market growth is not coming from AI itself, but from building the factories to generate AI capacity”. He added that “AI machines — in quite a literal sense — appear to be saving the US economy right now”. Meanwhile, RBC Capital Markets has advised clients to reduce tech holdings from “overweight” to “market weight” and favour sectors like healthcare, which tend to perform regardless of economic conditions.
Devine says that while analysts see the AI industry as fundamentally solid, young investors should understand that AI stocks can lose money quickly and may not be liquid when they need their savings for a home or retirement. She stresses the importance of research and aligning investment choices with personal financial goals.
Analysis
Why This Matters
- The column says the number of Australian investors has reached an all-time high, meaning many retail investors are exposed to the volatile AI sector.
- AI companies’ reliance on debt makes them vulnerable to rising US interest rates, posing risks for long-term savers.
- Warnings from major banks suggest the sector’s spending trajectory is unsustainable, with consequences for the broader economy if it slows.
Background
The AI industry has attracted enormous capital spending, with companies like CoreWeave and soon-to-list Anthropic and OpenAI drawing investor enthusiasm. However, as the column details, the sector is characterised by extreme share price swings and heavy dependence on borrowed money. While demand for AI services remains strong, the gap between current spending and actual revenue generation has raised red flags among financial analysts.
Key Perspectives
Victoria Devine: Argues that young investors drawn by high-profile IPOs should assess their risk tolerance, as AI stocks can drop sharply and may not deliver returns when savings are needed for goals like home deposits or retirement.
George Saravelos (Deutsche Bank): Describes AI spending as unsustainable, warning that a slowdown before the sector’s promises materialise could cause economic disruption. He notes that current growth is driven by building infrastructure, not by AI itself.
RBC Capital Markets: Recommends that clients cut their tech holdings to “market weight” and shift toward defensive sectors such as healthcare, which tend to perform regardless of economic conditions.
What to Watch
- The performance of CoreWeave and other heavily indebted AI companies as US interest rates continue to rise.
- Whether the upcoming Anthropic and OpenAI IPOs attract strong retail investor demand despite the sector’s volatility.
- The response of major investment banks to further signs of stress in the AI capital-expenditure cycle.