Art Market Appears on Strong, if Cautious, Footing After London Sales

Major auctions in London this week are proving the art market is in solid health at the start of 2023, yet high interest rates and inflation in addition to the war in Ukraine continue to keep enthusiasm in check.

Overall, more than 90% of the lots were sold at combined evening sales of modern, contemporary, and ultra-contemporary work at Christie’s and Sotheby’s, while Phillips evening sale was 100% sold. Those are unquestionably good results.

But there are signs throughout the market that consignors and collectors are holding back a bit, says Drew Watson, head of art services at Bank of America Private Bank.

“The sales were fairly solid, but there was kind of a lack of major headliners,” Watson says. “We’re seeing some increased conservatism among the collector base. There’s more of an emphasis on people looking at established categories like modern masters, blue-chip post-war, [and] Surrealism.”

A dedicated evening sale at Christie’s focused on Surrealism did well, for instance, realizing nearly £39 million (nearly US$47 million) with 30 of 32 lots sold. Sotheby’s will hold a dedicated Surrealist sale on March 15 in Paris.

But works by young contemporary, often female, artists continued to attract interest all week. At Phillips, “it was the cutting-edge woman artists who stole the show this evening,” Olivia Thornton, head of 20th-century and contemporary art, Europe, said at a news conference following an evening sale on Thursday.

Most notable among these artists at Phillips was Caroline Walker, whose large-scale work Threshold, painted in 2014, generated consistent back-and-forth volleying for more than 11 minutes. It eventually sold to a bidder in the sale room for a hammer price of £730,000, £927,100 with fees—a record for the artist.

Other records were achieved by Sarah Ball, whose Elliot, sold for £120,600, with fees, above an £80,000 high estimate, and by Angela Heisch, whose Egg White Blue sold for £76,200, above a £30,000 high estimate.

The results followed strong bidding for female artists at Christie’s earlier in the week, which included the previously minted record for Walker of £693,000 for The Puppeteer. Cristina Banban’s La Fatiga Que Me das (You Exhaust me) also achieved a record, selling for £163,800, above a high estimate of £70,000, and Michaela Yearwood-Dan’s Love me nots achieved £730,800, far above a £60,000 high estimate.

But also at Phillips, a dynamic canvas by Gerhard Richter offered by French collector Marcel Brient for between £10 million and £15 million, was withdrawn at the last minute. Although the work “generated interest from collectors,” it was not at a level that met Brient’s expectations, and so he “was not prepared to let it go,” Cheyenne Westphal, Phillips chairman, said at a press briefing after the sale.

The absence of the Richter resulted in a dramatically different overall auction total of £20.3 million for Phillips. The revised estimate for the 23 remaining works was between £15.8 million and £22.2 million.

Another work offered by Brient, an untitled late work by Willem de Kooning from 1984, sold for a hammer price of £5 million, £6 million with fees, below the presale low estimate of £7 million.

While the froth may be out of the market at the moment, there is some cautious optimism of the future, with a handful of single-owner collections anticipated for May. Already announced at Sotheby’s is a group of works to be offered by Jan Shrem and Maria Manetti Shrem of San Francisco, including a major work by Pablo Piccaso, in addition to the Erving and Joyce Wolf Family Collection of decorative and fine arts. Christie’s, meanwhile, will be selling 16 modern and post-war paintings from the collection of S.I. Newhouse that could realise more than US$144 million.

“We’re only going to see more as we get closer to those sales,” Watson says. It’s a sign, he adds, of “cautious optimism for the higher end of the market in New York.”

Buyers, however, remain more conservative, as was evident with some of the major works offered this week, such as Lucian Freud’s portrait, Ib Reading, 1997, which sold for £17 million, within expectations, at Sotheby’s. They are willing to buy, but at the right price.

“Buyers are pretty savvy, especially at the high end, and will kind of expect a bit of a discount” considering current macroeconomic and geopolitical conditions, Watson says. As a result, auction houses will need to be disciplined in how they price works. “It’s not really a market where you want to push estimates,” he says.

One notable shift this week was renewed active bidding from buyers in Asia, Watson says.

At Christie’s, a bidding war between collectors in Japan and Singapore for a painting by Shara Hughes, Rough Terrain, ended in the hands of the collector from Singapore who placed a bid of £500,000, well above the £300,000 high estimate. Overall, 13% of bidders were from Asia during Christie’s evening sale of 20th- and 21st-century art and a separate sale of Surrealist works.

Sotheby’s, meanwhile, credited “deep bidding” from Asia for driving results at its evening sales, with several of these collectors noted as the “underbidder.” Over half the lots in Sotheby’s The Now sale of ultra-contemporary works received bids from Asia, while Asian buyers secured Barbara Kruger’s Untitled (Out of your mind… In your face), 1989, which realised £889,000, above a high estimate, and Andy Warhol’s portrait of Debbie Harry, which realized £6.9 million, also above a high estimate, after spirited bidding in both instances.

An Asian buyer also bought Richter’s Abstraktes Bild, 1986, at Sotheby’s, in another active bidding round. The final price, with fees, was £24.2 million.

At Phillips, the last two lots attracted several online bids from China, although the paintings—Ball’s Elliot, and Danica Lundy’s Bonefire—went to a collector bidding via a specialist on the phone and to a Canadian online bidder, respectively.

Whether the results in London portend the future for the art market this year remains to be seen. It may be best at this point to consider a post-sale press conference comment from Phillips CEO Stephen Brooks, who said, “It’s difficult to draw conclusions from one week of sales.”

A sharp technology sell-off has exposed a new anxiety on global markets: whether the enormous borrowing behind the artificial-intelligence infrastructure boom can generate sufficient returns as interest rates rise and Chinese competition intensifies.

The artificial-intelligence investment boom has powered technology shares, semiconductor manufacturers and data-centre operators to extraordinary heights. Last week, investors were given a reminder that much of this expansion is being built with borrowed money.

The technology-heavy Nasdaq Composite fell 4.5 per cent over the week ended October 16, its weakest performance since late June. Semiconductor shares suffered an even deeper correction, with the Philadelphia Semiconductor Index losing about 11.4 per cent.

The selling spread quickly through global markets. Micron Technology fell 14.6 per cent over the week, while South Korea’s Samsung Electronics and SK Hynix dropped approximately 18 per cent and 24 per cent respectively.

This was more than a routine bout of profit-taking. Investors were reassessing three interconnected risks: higher interest rates, the rapidly expanding debt burden attached to AI infrastructure and the prospect of stronger competition from Chinese memory-chip manufacturers.

The debt behind the AI build-out

Artificial intelligence requires a physical infrastructure network of enormous scale. Data centres must be built, advanced processors purchased, power supplies secured and cooling systems installed before customers begin generating meaningful revenue from them.

Technology companies are increasingly supplementing their own cash with corporate bonds, syndicated loans, equipment leases, private credit and project-level financing.

JPMorgan describes the emerging funding model as a combination of conventional corporate borrowing and project finance tied to individual data-centre assets. In Australia, the Reserve Bank estimates that syndicated loans accounted for approximately three-quarters of data-centre financing during 2025 and 2026 to date.

The numbers are becoming large enough to affect broader credit markets. The Federal Reserve Bank of Dallas has cited Wall Street estimates suggesting AI-related investment-grade bond issuance could approach US$300 billion in 2026 alone.

That borrowing is not automatically problematic. Debt can be an efficient way to finance long-lived infrastructure when future revenue is sufficiently predictable. The concern is that AI technology, customer demand and computing economics are changing much faster than the repayment schedules attached to the assets.

A data centre financed today may carry debt for years. Investors must therefore make assumptions about future utilisation rates, electricity prices, chip performance, customer concentration and the amount businesses will ultimately pay for AI computing.

When interest rates rise, those assumptions become less forgiving.

Inflation changes the calculation

September’s US inflation data intensified the pressure. Consumer prices increased 3.7 per cent over the year, ahead of market expectations and up from 3.4 per cent in August.

The hotter reading reduced confidence that interest rates would fall quickly and pushed bond yields higher. That matters particularly for companies whose valuations depend on profits expected well into the future, as well as highly leveraged infrastructure operators that may need to refinance.

CoreWeave has emerged as a closely watched test case. The specialist cloud-computing company has accumulated substantial debt and lease obligations to build AI capacity, while relying on a concentrated group of large technology customers.

Its shares fell sharply during the sell-off, while the cost of insuring its debt against default climbed. CoreWeave has argued that its contracted backlog more than covers its obligations and that financial markets do not always understand its business model. Nevertheless, its securities have become a proxy for investor confidence in debt-funded AI infrastructure.

Oracle, another major investor in AI computing capacity, fell 8.8 per cent in Friday trading, while CoreWeave dropped 15.5 per cent.

The question is shifting from how much AI infrastructure can be built to how profitably it can be operated.

China adds another source of pressure

Interest rates were not the only catalyst. Reports of advances by Chinese memory-chip producer ChangXin Memory Technologies raised concerns that lower-cost Chinese products could increase competition across the global semiconductor industry.

Memory chips are essential to AI systems, but the industry is historically cyclical. Periods of tight supply and high pricing can encourage rapid investment, eventually producing oversupply and falling margins.

The prospect of a well-funded Chinese competitor expanding its technological capabilities unsettled investors in Samsung, SK Hynix and Micron. It also demonstrated that AI-related demand does not insulate chipmakers from conventional competitive pressures.

That combination—slower rate cuts, more expensive financing and potentially cheaper supply—challenged the assumption that every company exposed to AI would enjoy continually expanding margins.

A reset rather than the end of the boom

The sell-off does not establish that the AI boom is ending. Demand for computing power remains strong, the largest technology companies continue to generate formidable cash flows and many infrastructure projects are backed by long-term customer contracts.

What has changed is the market’s willingness to overlook the price and financing structure of that growth.

The most resilient companies are likely to be those able to fund investment from operating cash flow, secure long-duration customers and demonstrate that new capacity will earn returns comfortably above its financing costs.

More speculative operators may face greater scrutiny, particularly where debt is expensive, customers are concentrated or expected revenue depends on demand that has not yet materialised.

For Australian investors, the lesson extends beyond US technology shares. Local data-centre operators, infrastructure funds, electricity suppliers and property groups are increasingly exposed to the same investment cycle.

Artificial intelligence may remain one of the defining growth themes of the decade. But last week’s correction showed that enthusiasm for the technology does not eliminate financial discipline.

The next stage of the AI boom will be judged not only by computing power, model performance or demand for chips, but by something more traditional: whether the assets being financed can generate enough cash to repay the money borrowed to build them.

Fact box

Nasdaq Composite: Down 4.5 per cent for the week ended October 16, 2026

Philadelphia Semiconductor Index: Down approximately 11.4 per cent

Micron Technology: Down approximately 14.6 per cent

Samsung Electronics: Down approximately 18 per cent

SK Hynix: Down approximately 24 per cent

US September inflation: 3.7 per cent annually

Estimated 2026 AI-related investment-grade issuance: Approximately US$300 billion