New York — High-flying technology stocks are taking a bruising this week, as investors grow more skeptical about whether the AI boom will live up to expectations. Stocks dropped on Wednesday, led by declines in the tech sector, after a hotter-than-expected inflation report bolstered bets that the Federal Reserve will raise interest rates further. The S&P 500 fell 1.11% and the Nasdaq Composite fell 1.88%, each posting their worst day since July.
Shares of companies involved in the AI data center buildout — the “picks and shovels” of the AI boom — stumbled, from semiconductor chipmakers to cloud providers. Marvell (MRVL), a chipmaker, fell 8.7%, Oracle (ORCL) sank 8.8% and Dell (DELL) dropped 11.3%. A benchmark index tracking semiconductor stocks fell 4.3%, putting it down roughly 12% over the past week. Nvidia (NVDA) fell 3.2%, leaving it down roughly 7.5% since hitting a record high earlier this month.
Investors are digesting a range of concerns that are shaking sentiment around AI. Higher bond yields and sticky inflation have led to elevated borrowing costs, making the data center buildout more expensive. That’s raising concerns for the riskier, debt-heavy corners of the AI ecosystem. Meanwhile, chip stocks have had a rocky week after Chinese semiconductor company CXMT announced progress on advanced memory chips.
Core Weave (CRWV), a so-called neocloud backed by Nvidia, plunged 15.5% on Wednesday after commentators raised concerns about a surge in the company’s bond yields. The company has tens of billions of dollars of debt on its balance sheet as it borrows money to try and expand its business and market share. “Trees don’t grow to the sky,” said Steve Sosnick, chief strategist at Interactive Brokers. “You can’t just go up forever.”
Source: Wall Street Journal Markets · Summarized by HeadlinesBriefing