Nasdaq-100 slides as AI debt worries hit chip and cloud stocks

How far did the Nasdaq-100 fall on Friday?

The Nasdaq-100 slid 2.5% on Friday, Oct. 16, to 29,187.55. The index tracks the largest non-financial companies listed on the Nasdaq exchange, many of them technology firms.

Why it matters: The broader S&P 500 slid 1.1% to 7,659.44. The Dow Jones Industrial Average, a narrower gauge of big U.S. companies, fell 0.3%.

By the numbers: For the week, the Nasdaq-100 tumbled 5.5% and the S&P 500 slid 1.9%. The Invesco QQQ Trust, a popular fund that tracks the Nasdaq-100, fell 2.5% on the day.

Why did chip and cloud stocks drop?

Worries about how much AI infrastructure companies have borrowed drove the selling. These firms build and rent out the data centers and computing power behind AI tools.

CoreWeave (Nasdaq: CRWV) tumbled 11.9% to $61.39. Reports said the cost of insuring its debt against default reached a record this week. That cost rises when lenders see more risk that a borrower may not repay. The stock now trades 56.7% below its 52-week high.

Server maker Super Micro Computer (Nasdaq: SMCI) tumbled 9.9%. Data center operators IREN and Applied Digital also fell, according to reports. Cybersecurity company CrowdStrike (Nasdaq: CRWD) dropped 7.0%.

Memory chip makers led the tech decline. Micron Technology (Nasdaq: MU) tumbled 5.6% and SanDisk dropped 6.8%. Micron closed at $878.84, 27.6% below its 52-week high. The technology sector fund fell 3.0%.

Did any part of the market hold up?

Money moved into defensive stocks. These are companies such as power utilities and household-goods makers whose sales tend to hold up in any economy. Utilities funds rose 1.3% and consumer staples funds rose 1.1%.

Energy funds jumped 2.5%. Conflict around the Strait of Hormuz kept oil supply risks in focus, according to reports. A shift toward lower-priced, steadier stocks helped the Dow hold up better than the tech-heavy Nasdaq-100.

Bond yields barely moved. A yield is a bond's yearly interest as a share of its price. Changes are measured in basis points, which are small slices of a percentage point. The 10-year Treasury yield edged down 1 basis point to 5.09%. Reports said its high level kept weighing on growth stocks whose profits lie further in the future.

How could the Fed affect stocks from here?

Inflation reports earlier in the week came in hotter than expected. September consumer prices rose more than the consensus, the average economist forecast. Core prices, which leave out food and energy, also beat forecasts. Producer prices, what businesses charge for their goods, rose sharply.

Fed Chair Kevin Warsh spoke Friday at the IMF-World Bank meetings in Bangkok. Asked about a rate increase at the Oct. 28 meeting, he said, "I don't prejudge meetings." He rejected forward guidance, meaning signals about future rate moves, and pointed to incoming data.

The reports did not make clear whether the strain at CoreWeave extends to other AI borrowers. That open question may keep chip and cloud stocks sensitive to credit news.

The Fed announces its decision on Oct. 28 at 2 p.m. ET, followed by the chair's press conference. On Oct. 29, the government reports September household income and spending, including the PCE price index the Fed watches. October consumer prices follow on Nov. 10.