Business, Finance & Tech
Nasdaq Drops More Than 2% as AI Debt Concerns Rattle Investors
Technology stocks fell sharply Friday as investors weighed growing concerns about rising interest rates and the mounting debt used to finance the artificial intelligence boom.
The Nasdaq Composite dropped roughly 2.5%, bringing its weekly losses to nearly 5% and putting the index on track for its worst week since June. The S&P 500 fell 1.4%, leaving it down more than 2% for the week.
The sell-off comes just 10 days after both indexes reached record highs. Since then, concerns have grown that higher borrowing costs could put pressure on companies relying heavily on debt to expand their AI operations.
One major focus is CoreWeave, a company that rents computing power to businesses developing and operating AI systems. Backed by Nvidia, CoreWeave has borrowed tens of billions of dollars to fund its expansion, and rising bond yields have raised concerns about its financial risk.
Gil Luria, head of technology research at D.A. Davidson, told CNN that investors are questioning whether CoreWeave can generate enough returns to repay its debt. He said demand for AI remains real and is growing, but financing costs and the scale of the industry's expansion are creating uncertainty.
Nvidia CEO Jensen Huang expressed optimism about CoreWeave in comments to Bloomberg on Thursday, briefly helping lift the company's shares. The gains did not last: CoreWeave fell 14% Friday, lost about a quarter of its value over the week and remained down more than 60% from its peak shortly after its March 2025 initial public offering.
Semiconductor stocks also came under pressure. A closely watched index of chipmakers fell 3.9% Friday, marking its eighth consecutive daily decline. The index has dropped more than 20% since its June peak, although it remains up nearly 60% for the year.
Investors have been reassessing expectations for the AI infrastructure boom amid concerns about higher costs, potential obstacles to data center development and increased competition from China.
Chinese memory chipmaker CXMT recently announced progress on advanced memory chips, raising questions about whether U.S. and South Korean manufacturers will maintain their expected market dominance and pricing power.
The pressure extended to South Korea, where the Kospi index fell 14.5% for the week, its worst weekly performance since 2008. The index is heavily weighted toward chipmakers SK Hynix and Samsung Electronics. Despite the decline, the Kospi remained up approximately 35% for the year.
Semiconductor companies account for roughly one-fifth of the S&P 500's market value, making further losses in the sector a potential concern for the broader market.
Meanwhile, the Cboe Volatility Index, known as Wall Street's fear gauge, jumped 30% Friday and climbed above 20, signaling heightened market volatility.
The week's losses highlight growing investor uncertainty over whether the enormous investments powering the AI boom will deliver returns sufficient to justify their costs.
By: NBC Palm Springs
October 16, 2026
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