AI Debt Fears Rattle Wall Street

Mary Cunningham of CBS News reports tech stocks tumble as AI debt fears rattle Wall Street:

Financial markets slumped on Friday as investors bailed on technology stocks amid concerns that companies exposed to artificial intelligence are starting to wobble. 

The tech-heavy Nasdaq Composite tumbled 573 points, or 2.1%, to end at 26,140, closing out its worst week since June. The broader S&P 500 and blue-chip Dow Industrial Average sank 1.1% and 0.3%, respectively.

Chipmakers and other tech companies have been under pressure this week as investors worry about the heavy borrowing associated with the emergence of AI and the rapid buildout of thousands of data centers required to provide computing power for AI models.

So-called neocloud companies like CoreWeave, which provide the brute computing power AI models need to function, were particularly hard hit. That's because they are financing much of their capital expenditures through debt and equity issuance rather than cash flow, raising investor concerns about mounting debt, market analyst Adam Crisafulli, head of Vital Knowledge, told CBS News.

Shares of CoreWeave slid nearly 12% on Friday and dropped roughly 24% this week as investors nervously eye its mounting debt. Micron Technology fell 5.6%, Advanced Micro Devices dropped 6%, Broadcom was down 4.5% and Intel lost 5.8%.

Elsewhere on Wall Street, Tesla shares fell 2.1% after the electric vehicle company unveiled a new Roadster sports car that appears capable of thrusting itself into the air.

The downturn on Friday came amid concern about whether the AI company Anthropic, soon set to go public, will be able to maintain its revenue momentum, Crisafulli said in a note to investors. Anthropic investors are now considering valuing the company at $1.5 trillion, down from the original target of $2 trillion, Reuters reported on Thursday. 

Sean Conlon and Justina Lee of CNBC also report the Nasdaq slides 2% Friday to post worst week since June, pressured by AI sell-off and oil prices: 

Stocks slid on Friday as traders notched a mostly losing week amid a shift away from tech and artificial intelligence-related names as well as a rise in oil prices.

The S&P 500 lost 1.09% and ended at 7,659.44, while the Nasdaq Composite shed 2.14% to close at 26,140.03. Both indexes ended the session below their 50-day moving averages. The Dow Jones Industrial Average fell 175.28 points, or 0.34%, to 52,002.41. The sell-off sent the Cboe Volatility Index (VIX) above 22 for the first time in four months.

Chipmakers were lower again. The VanEck Semiconductor ETF (SMH) lost 3%, led by declines in Micron Technology, Advanced Micro Devices and Sandisk. Semiconductors have struggled this week amid jitters about competition from China. The SMH slid 10% week to date for its biggest weekly decline since April 2025.

Those declines, coupled with drops in other stocks linked to AI, dragged the S&P 500 to a losing week. The benchmark index fell about 2% this week, while the Nasdaq shed more than 4% for its worst week since June. The Dow, on the other hand, advanced 0.7% on the week.

Investors have also grown concerned that tech companies are borrowing too much for the AI buildout. Shares of neoclouds like CoreWeave, which has seen its total debt rise to more than $51 billion, were down nearly 12%, bringing the stock’s week-to-date losses to 25%.

“The question is: Is this a systemic issue?” said Michael Rosen, Angeles’ chief investment officer. “Obviously, increased debt issuance is something to observe and continue to watch and be concerned about if it continues to get to levels of excessiveness. But we’re not remotely close to that right now.”

Other areas of the market such as energy saw gains Friday, with stocks like Chevron helping to keep the Dow’s losses in check. Oil prices moved higher amid rising tensions between the U.S. and Iran as well as between Russian and Ukraine. West Texas Intermediate crude futures increased 3.51% to settle at $101.41 per barrel, while Brent crude futures advanced 3.72% to $109.86.

Simultaneously, investors have been grappling with hotter-than-expected inflation data, which has been exacerbated by elevated energy prices in the wake of the U.S.-Iran war. Wholesale inflation this week saw its biggest gain since 2022, while consumer inflation remained well above the Federal Reserve’s target of 2%.

Fed Chairman Kevin Warsh spoke at an IMF event in Bangkok overnight. And while he didn’t comment on whether the Fed would raise rates before year-end, traders took that as a sign that the central bank will hold policy steady later this month. The CME Group’s FedWatch tool points to an 82% chance the Fed keeps its overnight rate unchanged at its Oct. 27-28 meeting. 

Rich Asplund of Barchart also reports stock indexes finish sharply lower as tech stocks plunge:

The S&P 500 Index (SPY) closed down by -1.09% on Friday, the Dow Jones Industrial Average (DIA) closed down by -0.34%, and the Nasdaq 100 Index (QQQ) closed down -2.50%.  December E-mini S&P futures (ESZ26) fell -1.14%, and December E-mini Nasdaq futures (NQZ26) fell -2.51%.

Stock indexes sold off sharply on Friday, with the S&P 500 falling to a 2-week low and the Nasdaq 100 dropping to a 1-month low.  Selling in chipmakers and AI-infrastructure stocks led the market lower on Friday, driven by concerns about whether companies will see returns on their huge investments in the AI infrastructure buildout.  Also, CoreWeave sank more than -11% to weigh on cloud infrastructure stocks as concerns about the company’s credit risk linger.

Stock losses accelerated Friday afternoon as crude oil prices soared more than 3% to a 1-month high, raising inflation expectations and fueling fears the Fed will keep raising interest rates to contain inflation. 

Higher bond yields undercut stocks after Fed Chair Warsh made no remarks on monetary policy or his outlook for the US economy late Thursday evening at the IMF annual meeting in Bangkok.  The 10-year T-note yield rose +1 bp to 5.09%.

Friday’s US economic news was mixed for stocks.  The Sep import price index ex-petroleum rose +0.8% m/m, stronger than expectations of +0.6% m/m, the largest increase in 5 months and a sign of price pressures.  However, Sep manufacturing production rose +0.3% m/m, right on expectations.

Stocks have support from the prospect of solid quarterly earnings results that began this week.  Goldman Sachs on Monday raised its three-month view on global equity markets to overweight from neutral, saying. “Earnings growth remains supportive for equities and the recent valuation de-rating has improved asymmetry into the third-quarter earnings season.” According to data compiled by Bloomberg Intelligence, Q3 S&P 500 earnings are expected to climb by +25% from a year earlier, up from a July estimate of 22%.  As of Friday, 40 of the S&P 500 companies have reported results, with 78% beating estimates.

Nov WTI crude oil prices (CLX26) surged more than +3% on Friday to a 1-month high.  Crude prices rallied on Friday amid a weaker dollar and concerns that escalating Middle East hostilities could disrupt regional energy supplies.  Prices race to their highs Friday afternoon after US lawmakers introduced a bill to block President Trump’s deal with Russia to release several hundred million barrels of diesel fuel. 

Markets are discounting a 17% chance of a +25 bp Fed rate hike at the next FOMC meeting on October 27-28.

Overseas stock markets settled higher on Friday.  The Euro Stoxx 50 closed up +0.58%.  China's Shanghai Composite closed up +0.24%.  Japan's Nikkei-225 Stock Average closed up +1.39%.

Interest Rates

December 10-year T-notes (ZNZ6) closed down -2.5 ticks on Friday.  The 10-year T-note yield rose +2.7 bp to 5.085%.  Dec T-notes were under pressure Friday after Fed Chair Warsh's lack of guidance at the annual IMF meeting in Bangkok weighed on T-notes.  Also, Friday’s +3% surge in WTI crude oil to a 1-month high raised inflation expectations and weighed on T-notes.  Friday’s stock plunge sparked safe-haven buying of government debt and limited T-note losses.  

European government bond yields were mixed on Friday.  The 10-year German bund yield rose +1.3 bp to 3.426%. The 10-year UK gilt yield fell -0.2 bp to 5.373%.

ECB Governing Council member and Bundesbank President Joachim Nagel said. "The ECB has raised interest rates twice, and if the situation remains as it is, we don't rule out the possibility that we may have to take further action."

Markets are discounting a 10% chance of a +25 bp ECB rate hike at the ECB’s next meeting on October 29.

US Stock Movers

Chipmakers and AI-infrastructure stocks continued their week-long slide on Friday, weighing on the broader market.  Seagate Technology Holdings Plc (STX) closed down more than -7%, and Western Digital (WDC), SanDisk (SNDK), and ARM Holdings Plc (ARM) closed down more than -6%.  Also, Advanced Micro Devices (AMD), Micron Technology (MU), Intel (INTC), and Marvell Technology (MRVL) closed down more than -5%, and Lam Research (LRCX), KLA Corp (KLAC), Applied Materials (AMAT), and Broadcom (AVGO) closed down more than -4%.  In addition, 

CoreWeave (CRWV) closed down more than -11% to weigh on cloud infrastructure stocks as debt concerns linger after swaps priced in more than a 50% chance the company will default on its debt within five years.  Also, Nebius Group NV (NBIS) closed down more than -12% to lead losers in the Nasdaq 100, and Applied Digital (APLD) closed down more than -11%. In addition, Lumentum Holdings (LITE) closed down more than -5%, and Oracle (ORCL) and Arista Networks (ANET) closed down more than -4%.

The Magnificent Seven stocks, excluding Apple, fell on Friday and weighed on the overall market.  Meta Platforms (META) closed down more than -3%, and Alphabet (GOOGL) closed down more than -2% to lead losers in the Dow Jones Industrials.  Also, Tesla (TSLA) closed down more than -2%, and Amazon.com (AMZN), Microsoft (MSFT), and Nvidia (NVDA) closed down more than -1%.  Apple (AAPL) bucked the trend and closed up +0.43%. 

Cybersecurity stocks retreated on Friday.  Okta (OKTA) closed down more than -10%, and SentinelOne (S), Fortinet (FTNT), Crowdstrike Holdings (CRWD), and Palo Alto Networks (PANW) closed down more than -7%.  Also, Cloudflare (NET) closed down more than -6%, Zscaler (ZS) closed down more than -5%, and Gen Digital (GEN) closed down more than -2%.

Energy producers and service providers rallied on Friday after WTI crude oil rose more than +3% to a 1-month high. APA Corp (APA) closed up more than +4%, and Diamondback Energy (FANG) closed up more than +4% to lead gainers in the Nasdaq 100.  Also, ConocoPhillips (COP) and  Devon Energy (DVN) closed up more than +3%, and Chevron (CVX) closed up more than +2% to lead gainers in the Dow Jones industrials. In addition, Baker Hughes (BKR), ExxonMobil Holdings (XOM), Occidental Petroleum (OXY), and SLB Ltd (SLB) closed up more than +2%, and Halliburton (HAL) and Phillips 66 (PSX) closed up more than +1%.

Defense contractors rose on Friday as the companies are set to benefit from increased defense spending. Northrop Grumman (NOC) closed up more than +4%, and  Lockheed Martin (LMT), RTX Corp (RTX), and L3Harris Technologies (LHX) closed up more than +3%.  Also, General Dynamics (GD) closed up more than +2%, and Huntington Ingalls Industries (HII) closed up more than +1%.

Defensive food producers moved higher on Friday amid the slump in the broader market.  Kraft Heinz Co (KHC), McCormick & Co (MKC), J M Smucker (SJM),  Hershey Co (HSY), Hormel Foods (HRL), and Mondelez International (MDLZ) closed up more than +1%.

Omeros (OMER) closed down more than -14% after the European Medicines Agency issued a negative opinion on the company’s application for its narsoplimab therapy.

Earnings Reports (10/19/2026)

AGNC Investment Corp (AGNC), BOK Financial Corp (BOKF), Cleveland-Cliffs Inc (CLF), Crown Holdings Inc (CCK), Fifth Third Bancorp (FITB), FNB Corp/PA (FNB), RLI Corp (RLI), Steel Dynamics Inc (STLD), W R Berkley Corp (WRB), Western Alliance Bancorp (WAL), Wintrust Financial Corp (WTFC), Zions Bancorp NA (ZION).

Alright, it's Friday, let me get right to it because there's lots to cover today.

First, check out the worst-performing US large-cap stocks this week (full list here):

 

As you can see, shares of Ciena, Coreweave, Hewlett Packard, Dell and Cerebras Systems were all dinged hard this week, down 22% or more.

I was watching the action in CoreWeave (CRWV) shares on Thursday and Friday and it was just insane:

After touching a low of $59.51 on Thursday morning, the stock bounced big to close at $69.69.

Then on Friday, the bears came back and drove shares all the way back down to $59.90 before it closed at $61.39. 

And all this on massive volume over the last three days. 

The well-known hedge fund Magnetar is the top holder along with Blackrock and Nvidia.

Fears that the company won't be able to service its debt are way overblown in my opinion, but in this market, you shoot first, ask questions later.

Moreover, to me, this week felt like manufactured fear, nothing fundamental has changed.

But in a jittery market, that doesn't matter, traders just sell indiscriminately, and that creates opportunities.

October is always a funny month. Mutual funds close their year at the end of the month; you see a lot of funny action depending on how the year went going into October. 

Having said this, there's no denying RISK OFF is dominating markets and you see this in the riskiest sectors of the market, like biotech where the ETF is down 6% this week:

And some biotech shares, like Viking Therapeutics (VKTX), are faring worst, going from a 52-week high of $43 to a 52-week low of $25 in just two weeks: 

Talk about brutal biotech moves. You need intestinal fortitude to ride out this volatility. 

But remember what I told you. To me, all this seems like manufactured fear; the big hedge funds are buying while the little retail fish are panicking and selling.

That's my two cents on these schizoid markets.

Enjoy your weekend!

Below,Dan Greenhaus, Solus Alternative Asset Management, Tom Lee, Fundstrat Global Advisors, and Ed Clissold, Ned Davis Research, join 'Closing Bell' with reaction to the day's market action.

Also, the CNBC Investment Committee debates whether the AI trade is on shaky ground. They share their portfolio strategies.

third, Scott Wapner sat down with Brad Gerstner, founder and CEO of Altimeter Capital, in San Francisco to discuss AI, the market and more.

Fourth, Bloomberg's Ed Ludlow said that equity market investors are looking at CoreWeave's ballooning debt and the cost of maintaining that debt as it reassesses its credit risk. CoreWeave, a 'neocloud' company that only runs AI data centers, is supplied solely by chip giant Nvidia and runs AI processing for OpenAI and Microsoft. Both CoreWeave's CEO and Nvidia's Jensen Huang have downplayed concerns around CoreWeave's financial structure, bolstering the company's stock.

Lastly, On this episode of The Weekly Wrap, Steve Eisman examines the growing risks and opportunities surrounding AI, from rising debt at AI data center companies to concerns about the future of the AI boom. He also breaks down the latest bank earnings and the impact of agentic AI on financial institutions.