A darker mood is setting in across markets and, alarmingly, only one company can break the funk.

All of the frothiest bits of finance are now under pressure. Bitcoin — perhaps the purest gauge of speculative fervour — has dropped 29 per cent from its high and is now negative on the year.

Stocks in companies that buy and store bitcoin, and do little else (yes, this is a thing), are in severe distress. Biggest of them all, Strategy Inc. (formerly MicroStrategy), is down by more than 30 per cent this year, and over 50 per cent since its summer high. Its co-founder Michael Saylor has sought to instill confidence by posting an AI-generated image of a burning, sinking ship, urging his followers to stay strong.

Shares in unprofitable U.S. tech companies have been wilting for weeks, suggesting investors, even adventurous retail investors, are starting to lose patience with the hype.

This is all ominous enough, but the wobbles are not confined to the spicier bits of tech and quasi-gambling punts.

Shares in Facebook owner

Meta Platforms Inc.

are now flat for the year, having discarded a quarter of their value since August as investors balk at seemingly never-ending spending on

artificial intelligence

.

Strain in private markets is not always easy to see, but a string of blow-ups has scratched nerves in the past couple of months and the value of listed private finance firms is falling well behind broader U.S. stock markets.

Absolute Strategy Research’s index capturing companies such as Blackstone Inc., KKR & Co. Inc. and others has fallen by 13 per cent this year — the mirror image of the S&P 500. Clearly, the big recovery and ascent in benchmark U.S. stock indices are concealing a multitude of sins. Beneath the surface, investors are proving hard to impress.

The clear risk is this blossoms into a broad reckoning for markets that have been hopped up on hope since the spring of this year. Early potential signs of this are already apparent.

At an index level, stocks have already backed away from recent highs, with weakness spread far and wide. In the S&P 500 index, some 407 stocks fell on Monday, the broadest sell-off in five weeks, according to Deutsche Bank. Classic signs of nerves, such as the Vix index of anticipated stock market volatility, are pushing higher. Corporate bonds, unnerved by the huge splurge of borrowing by Big Tech companies, have weakened a little too, breaking an extraordinary run of vanishing falls between corporate and government bond yields.

This outbreak of measured but real alarm comes after a pretty wild party from fund managers in recent months. As Bank of America suggests in its regular survey, investors have been running the highest allocation to stocks since February, when the American exceptionalism trade was still alive and well, and scant allocations to cash. This provides a long way to fall.

But the wobble should come as little surprise to anyone who has been paying attention to market excesses in recent months. All the recent talk of a “K-shaped” U.S. economy and “K-shaped” markets, with the strongest and wealthiest holding up more than their fair share of the sky while the weakest stumble through, reflects just that.

Wealth inequality and market concentration are hardly new features of U.S. finance, but narratives have been brought to you by the letter K partly because everyone can see the same imbalances and points of vulnerability. Investors generally know full well that something here smells off, and they know that they are extremely exposed if anything were to go wrong.

The easy thing to do is blame the  United States

Federal Reserve

. Chair Jay Powell’s hints at the U.S. central bank’s most recent meeting that further rate cuts are not a nailed-down certainty have clearly hit a nerve. But investors should own their own exuberance. Blaming the Fed is a little cheap.

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It now falls to

Nvidia Corp.

to make or break the mood in the final weeks of the year, with earnings results from the US$4.5 trillion chipmaker due after markets close on Wednesday.

Even the true believers in the potential of AI are getting nervous about this, with filings revealing that tech supremo Peter Thiel’s hedge fund Thiel Macro has already offloaded its entire stake in the company.

If investors like the look of Nvidia’s third-quarter earnings, bulls will push for an upbeat end to the year. If not, watch out below.

Concentration risk is much more fun on the way up than it may be on the way down.

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