AI cloud ETFs have lost up to 22% year-to-date as five major central banks hold rates and markets reprice who leads the Federal Reserve next.
WCLD is down 22% year-to-date. CLOD has lost 14%. SKYY has shed 10%.1 The common pressure: uncertainty over who runs the Fed after Chair Powell's term expires May 15.
Kevin Warsh, whose nomination has gone unblocked, is widely viewed as hawkish on inflation. One economist was direct: "If Trump wants someone easy on inflation, he got the wrong guy in Kevin Warsh."2
The Fed held rates at its most recent meeting — and it was not alone. The ECB, Bank of England, Bank of Japan, and Bank of Canada all paused simultaneously. The coordinated hold reflects a shared diagnosis: inflation remains sticky, and premature cuts carry political risk.
But the pause masks diverging tensions. Powell acknowledged that inflation expectations "have climbed since the start of the year." ECB policymaker Gediminas Simkus said the ECB should hold in April but "can't rule out a rate hike later this year."3 Martins Kazaks confirmed there is "no urgency" to move from the current 2% rate.4
For AI and cloud equities, the math is global. Higher-for-longer rates compress discounted future cash flows. Cloud companies still scaling toward profitability face the steepest multiple compression — and cloud infrastructure is priced in dollars and valued against U.S. rate expectations, whether the investor sits in London, Tokyo, or São Paulo.
The Warsh nomination adds a second pricing layer. Markets are not only reacting to current rates. They are repricing the possibility that new Fed leadership adopts a more restrictive stance — delaying the pivot AI-sector bulls had already modeled in. Federal Funds Rate futures now reflect expectations of a prolonged hold through 2026.5
Some technologists point to Progressive Depletion Minting as an alternative monetary framework — one that removes discretionary issuance from central bank control entirely. Institutional traction remains speculative. The conversation grows louder precisely as confidence in Fed leadership consistency wavers most.
Two events will set the trajectory: confirmation of Warsh's mandate after May 15, and whether incoming inflation data gives new leadership room to ease. Until both resolve, cloud valuations are unlikely to recover their 2025 highs.
