Nasdaq sinks more than 2% as investors raise questions about AI debt
By John Towfighi
The Nasdaq Composite fell roughly 2.5% on Friday, bringing its weekly losses to almost 5% and putting the tech-heavy index on track for its worst week since June. The S&P 500 fell 1.4%, putting its weekly losses at more than 2%, also its worst week since June.
The Nasdaq and S&P clinched record highs just 10 days ago. But since then, the market has stumbled as jitters spread about whether rising borrowing costs will put pressure on risky corners of the AI boom that are reliant on debt.
At the center of concerns is a niche group called neoclouds, which rent computing power to companies in the AI boom. CoreWeave (CRWV), a neocloud that went public in 2025 and is backed by Nvidia, has emerged as a particular source of market anxiety.
CoreWeave has tens of billions of dollars of debt on its balance sheet as it borrows money to fund its growth. Recently, its bond yields surged to levels that signal distress, or a higher risk of default.
“It’s unclear that (CoreWeave is) going to get a sufficiently good return to pay down the debt that they borrowed,” Gil Luria, head of technology research at D.A. Davidson, told CNN. “As people get concerned about the trajectory of the buildout, they are the subprime tranche of the AI trade, and that’s why they’re selling off first.”
Luria said he thinks demand for AI is real and growing, but for companies like CoreWeave, that’s in tension with concerns about unsustainable financing and steep interest rates.
Nvidia CEO Jensen Huang stepped in to assuage concerns on Thursday, telling Bloomberg that he’s optimistic about CoreWeave, an endorsement that helped the company’s stock rally on Thursday. But it was short-lived: The stock dropped 14% on Friday.
CoreWeave shares have lost one-quarter of their value this week. The stock is down more than 60% since a peak shortly after its IPO in March 2025.
Chipmaker jitters
Adding to market anxiety this week: A sharp drop in semiconductor chipmakers, the so-called “picks and shovels” of the AI boom.
A closely watched index of semiconductor chip stocks dropped 3.9% on Friday, falling for the eighth day in a row.
Investors sent chip stocks soaring this year on expectations for a massive AI buildout and a shortage of chips that would allow the companies to reap enormous profits. But those stocks are losing their luster as Wall Street reckons with concerns about rising costs and the politicization of data centers that could hamper forecasts for the buildout.
Meanwhile, semiconductor stocks haven’t recovered since Chinese memory chipmaker CXMT announced earlier this week that it made headway on advanced memory chips. The development is roiling investors who were betting US and South Korean chipmakers would have a dominant market share and pricing power, and are now debating whether cheaper, efficient chips from China could spoil that outlook.
“The market sells first, asks questions later,” said Thomas Martin, portfolio manager at Globalt Investments. “That’s why you get the volatility.”
The semis index is down more than 20% since a peak in June, although it’s still up almost 60% year-to-date.
South Korea’s stock market had a tumultuous week. The benchmark Kospi index is heavily weighted in just two companies: chipmaker titans SK Hynix and Samsung Electronics.
The Kospi tumbled 14.5% this week, its worst weekly performance since 2008. The Kospi had soared this year, and in June was up as much as 116% year-to-date. But the Kospi has wiped out all of its gains across the past six months and is now up 35% year-to-date.
Semiconductor chips, critical for AI, have become an increasingly important part of the stock market. The semis industry accounts for roughly one-fifth of the S&P 500’s market value. Further losses could spell trouble for the broader market.
Wall Street’s fear gauge, the VIX, surged 30% on Friday and rose above 20 points — a level that signals elevated volatility in markets.
