Tech & AI
Chip stocks extend losing streak as CoreWeave credit concerns mount
Chip stocks kept falling this week. Worries about CoreWeave's debt and higher borrowing costs led investors to ask who will pay for the AI buildout, according to reports.
Quick Read
- The Nasdaq-100 tumbled 5.5% this week as chip stocks extended a long losing streak.
- Stress in CoreWeave's debt has turned attention to who pays for the AI buildout, according to reports.
- The 10-year Treasury yield ended the week at 5.09% after falling 15 basis points over the week.
- The Fed's rate decision on Oct. 28 is the next scheduled checkpoint.
How far did chip and tech stocks fall?
The iShares Semiconductor ETF, a fund that trades like a stock and holds chipmakers, fell again on Friday. Reports said its losing streak was its longest in decades.
Why it matters: The Nasdaq-100, an index of large Nasdaq companies dominated by tech, slid 2.5% on Friday. It tumbled 5.5% for the week. The technology sector fund tumbled 3.0% on Friday.
By the numbers: The S&P 500 slid 1.9% for the week. Among the stocks tracked on Friday, 819 fell while 526 rose.
Why are investors worried about CoreWeave?
CoreWeave, a cloud provider tied to the AI buildout, has become the focus. Its shares fell sharply on Wednesday. The cost of insuring its debt reached a record, according to reports.
Its bonds also traded well below face value. Credit default swaps, contracts that work like insurance against a borrower failing to pay, signaled a high chance of default, reports said.
The concern reaches beyond CoreWeave. Reports said investors still back AI spending but now ask who will pay for it. Memory makers and chip equipment suppliers were among the week's decliners.
What role do interest rates play?
Borrowing has grown costlier this year. The Federal Reserve raised its benchmark rate in September, according to reports.
The 10-year Treasury yield, the bond market's benchmark for long-term borrowing costs, ended Friday at 5.09%. It slid 15 basis points over the week but has climbed 91 basis points this year.
September consumer prices rose faster than forecasters expected, reports said. Odds of an October rate increase rose after that report, then eased by Friday, according to CME FedWatch.
What comes next?
What’s next: The Fed announces its next rate decision on Oct. 28, followed by the chair's press conference. On Oct. 29, the government releases an early estimate of economic growth and a report on household spending and prices.
For readers
What it could mean for you: People who own a technology or semiconductor fund have felt this week's selling more than holders of broad index funds. Those funds concentrate on companies tied to AI spending. If doubts about how the AI buildout gets financed persist, such funds could swing more than the wider market. The Fed's Oct. 28 decision and coming inflation data may shift borrowing costs, which could affect how investors value these companies.
Questions and answers
Why are chip stocks falling?
Reports point to growing worries about how the AI buildout will be paid for, sharpened by stress in CoreWeave's debt. Higher interest rates and hotter inflation have also made borrowing costlier.
What is happening with CoreWeave's debt?
The cost of insuring CoreWeave's debt against default reached a record this week, and its bonds traded well below face value, according to reports. Its shares also fell sharply on Wednesday.
How did the Nasdaq-100 do this week?
The Nasdaq-100, an index of large Nasdaq companies dominated by tech, tumbled 5.5% for the week, including a 2.5% slide on Friday.
When is the next Fed rate decision?
The Fed announces its next rate decision on Oct. 28, followed by the chair's press conference.
The numbers
| S&P 500 change | −1.09% |
|---|---|
| 10-year Treasury yield | 5.09% |
Week ended Friday
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Not investment advice.
