Stocks
Nasdaq posts worst week since June as AI debt worries hit CoreWeave
The Nasdaq fell about 4.5% in the week to October 16 as investors questioned debt-funded AI infrastructure. CoreWeave lost more than a fifth of its value.
By Daily Forex Report News Desk
Key points
- The Nasdaq Composite fell 2.14% on October 16 and about 4.5% for the week, while the S&P 500 lost almost 2%.
- CoreWeave shares fell more than 22% for the week, its October 2031 bond yielded above 16% and its credit default swaps passed 1,000 basis points.
- The semiconductor index dropped 11.4% for the week, its worst since April 2025.
US technology stocks had their worst week since June as investors grew more cautious about the amount of debt funding artificial intelligence infrastructure. The Nasdaq Composite fell 2.14 percent on Friday, October 16, and about 4.5 percent over the week, while the S&P 500 dropped 1.09 percent on the day and almost 2 percent for the week, CNN reported. Both indices had set record highs about ten days earlier.
AI cloud provider CoreWeave was at the center of the selloff. Its shares were down more than 22 percent for the week by Friday morning, on track for their worst week in over 11 months, according to Reuters. The company carries about 50 billion dollars of debt. The yield on its October 2031 dollar bond briefly rose above 16 percent on Thursday, and the cost of insuring its debt with credit default swaps passed 1,000 basis points, a record, according to S&P Global Market Intelligence data cited by Reuters.
Other companies building data centers for AI also fell. Nebius Group declined 6.4 percent, Applied Digital 4.2 percent and IREN 5.5 percent, Reuters reported. The semiconductor index fell 3.8 percent on Friday, its eighth straight daily decline, and 11.4 percent for the week, according to CNN. The VIX volatility index rose above 20.
Interest rates added to the pressure. Hotter US inflation data raised bets on further rate increases, which would lift borrowing costs for heavily indebted infrastructure companies, Reuters said. "It's unclear that (CoreWeave is) going to get a sufficiently good return to pay down the debt that they borrowed," Gil Luria, head of technology research at D.A. Davidson, told CNN.
Some investors defended the company. Evercore kept its outperform rating, saying markets were treating higher bond yields as proof the business model had stopped working, a view it rejects, according to Reuters. Nvidia chief executive Jensen Huang said on Thursday that he was optimistic about CoreWeave, though the rally that followed his comments faded on Friday.
Sources
- ■
- ■
Background and analysis: Stocks & Equities