Bitcoin is back, but not as you know it
The US Securities and Exchange Commission finally approved spot bitcoin ETFs this week
2 min
Several of the first spot bitcoin exchange-traded funds (ETFs) to ever be listed on United States stock markets began trading last night. This follows the US Securities and Exchange Commission (SEC) approving the listing of 11 spot bitcoin ETFs after a legal battle with fund provider, Grayscale. The approval follows six years of knock-backs for many fund providers seeking permission to offer spot bitcoin ETFs. This is considered a watershed moment in the investing world, allowing more investors to gain exposure to the cryptocurrency asset without buying bitcoin directly themselves.
ETFs are baskets of assets that are professionally managed by fund providers. Ordinary investors can buy them on the stock market just like any other share. Among the 11 fund providers approved to launch their ETFs this week are BlackRock, Fidelity, Grayscale and VanEck.
Spot bitcoin ETFs give investors direct exposure to bitcoin at its spot (current) price. The ability to buy bitcoin exposure via a traditional stock exchange will give investors some degree of regulatory protection as the fund managers must comply with the Securities Act, Exchange Act, and SEC rules. Investors may also feel more peace of mind buying bitcoin via a professionally managed ETF instead of buying it directly themselves through an unregulated cryptocurrency trading platform.
However, SEC Chair Gary Gensler emphasised that the decision to approve the spot bitcoin ETFs did not mean the SEC endorsed cryptocurrency assets. He said bitcoin was “primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing”. He added: “While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”
The SEC’s decision follows a lawsuit launched by Grayscale after the SEC refused to allow it to convert its Grayscale Bitcoin Trust into a listed ETF. The US Court of Appeals for the District of Columbia found that the SEC had failed to adequately explain its reasons for denying the listing. This meant the SEC had to review its ruling and either more fully explain its reasoning, or approve the listing of the ETF. Gensler said in light of these circumstances, “I feel the most sustainable path forward is to approve the listing and trading of these spot bitcoin [ETF] shares”. The SEC not only approved Grayscale’s product but 10 other spot bitcoin ETF applications awaiting a decision.
Gensler warned that the approval of spot bitcoin ETFs would not automatically open the door for other cryptocurrency ETF products. “It should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities,” he said. Bitcoin closed slightly lower at US$46,382.60 in overnight trading. Cryptocurrencies are known for their volatility. In the case of bitcoin, it hit an all-time peak value of just under $69,000 in November 2021 before crashing to below $17,000 in 2022. Over the past 12 months, the bitcoin price has risen by almost 160%.
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Technology and semiconductor shares fell sharply as investors questioned the debt financing the AI infrastructure boom and confronted higher rates and Chinese competition.
Technology and semiconductor shares fell sharply as investors questioned the debt financing the AI infrastructure boom and confronted higher rates and Chinese competition.
4 minA 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
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