Nasdaq Drops 2.1% as AI Debt Fears Hit CoreWeave, Chipmakers and Anthropic's IPO Price
The Nasdaq had its worst week since June, with 10-year Treasury yields stuck at 5.1% and traders now putting a December Fed rate hike at 74%.
Technology stocks fell sharply on Friday as investors grew nervous about how much debt is financing the artificial intelligence boom, handing the Nasdaq its worst week since June.
The Nasdaq Composite lost 573 points, or 2.1%, to close at 26,140. The S&P 500 dropped 1.1% and the Dow Jones Industrial Average slipped 0.3%.
The sharpest pain was in companies tied to AI computing. CoreWeave, which rents computing power to AI developers, slid nearly 12% Friday and about 24% over the week. The company is paying for much of its capital spending with borrowed money and new stock rather than cash flow, which has made its growing debt load a focus for investors. Chipmakers fell too. Advanced Micro Devices dropped 6%, Intel 5.8%, Micron Technology 5.6% and Broadcom 4.5%. Tesla fell 2.1% after Elon Musk unveiled a new Roadster that appears able to thrust itself into the air.
Adam Crisafulli, head of Vital Knowledge, told CBS News that so-called neocloud companies such as CoreWeave are raising concern because of their reliance on debt and equity financing. In a note to clients, he said the selloff also reflected worry about whether Anthropic, which is expected to go public soon, can keep growing its revenue fast enough. Reuters reported Thursday that investors are weighing a valuation of $1.5 trillion for the company, down from an original target of $2 trillion.
The backdrop is uncomfortable for borrowers of every kind. Recent data showed U.S. inflation moving further above the Federal Reserve's 2% target. The yield on the 10-year Treasury note held at 5.1% on Friday after reaching its highest level in more than two decades earlier this month. That yield is a benchmark for mortgages, credit cards and other loans, so it feeds directly into what companies and households pay to borrow.
The Fed raised interest rates at its September meeting, setting the federal funds rate at a range of 3.75% to 4%, the highest since December 2025. The central bank meets again October 28 and 29. Some economists say hot inflation readings could argue for another increase, though most traders expect rates to stay where they are at that meeting. Looking further out, the odds of a hike in December have jumped to 74.3% from 50.2% a month ago, according to CME FedWatch.
Fed Chairman Kevin Warsh gave no hint about the next move on Friday while attending a financial leaders' meeting in Bangkok.
The combination matters for the AI trade in particular. Many of the companies building data centers have leaned on cheap credit, and higher rates raise the cost of carrying that debt just as questions mount about when the spending will pay off. A lower price for Anthropic's offering would add to the sense that expectations had run ahead of reality.
