AI Financing Fears Trigger Global Tech Rout, Nasdaq Futures Slide

US stock futures pointed to further losses on Thursday as the global selloff in artificial-intelligence-related shares entered a second week, fueled by worsening concern over the opaque financing structures underpinning the industry’s massive infrastructure buildout.

Nasdaq 100 futures slid 1.1% by 6:20 a.m. ET, following Wednesday’s 2% decline in the underlying index, according to reports from ZeroHedge. S&P 500 futures fell 0.3%, while Dow futures were fractionally higher, and Russell 2000 futures rose 0.3%.

The rout ricocheted through Asia for a third consecutive day. South Korea’s KOSPI composite index tumbled as much as 7.5% on Thursday, according to Reuters, dragging the benchmark into a bear market and triggering circuit breakers. Japan’s Nikkei 225 dropped 5%, and Chinese markets also lost ground.

**Debt-Fueled Buildout Under Scrutiny**

At the center of investor angst is the heavy reliance on borrowed money by firms building the data centers and computing infrastructure required for generative AI. The cloud-computing provider CoreWeave, which issues debt to finance its capacity, has become a bellwether of the pain.

CoreWeave’s 2032 bonds, issued just four months ago, fell below 80 cents on the dollar on Thursday — a level typically considered distressed, Reuters reported. Another CoreWeave bond maturing in 2031 yielded 16% earlier this week and slumped to a record low price, according to a separate Reuters report. The stock itself fell roughly 24% over the week reported CBS News, including a 12% slide on Friday.

Worries about so-called circular financing — where AI firms borrow to build capacity that is then leased to other AI firms — have amplified selling pressure. Credit markets are leading equities, Reuters noted, with the cost of insuring against default by major US AI companies soaring to record highs.

**Growth Concerns at Anthropic**

Adding to the unease, Anthropic, the AI startup poised to go public, disclosed third-quarter revenue that investors viewed as slowing from the prior quarter, ZeroHedge reported. CBS News reported that Anthropic investors are now considering valuing the company at $1.5 trillion, down from an original target of $2 trillion.

The slowdown in revenue growth, combined with the debt-distress signals, has deepened skepticism that the AI boom’s massive capital expenditure can generate commensurate returns in the near term. A report by Gartner warning that $3.5 trillion of AI infrastructure spending could be at risk of impairment by 2030 also circulated widely on Thursday, according to ZeroHedge.

**Chipmakers and Neoclouds Hammered**

Semiconductor stocks have borne the brunt of the rotation. The Philadelphia Semiconductor Index fell for a sixth straight session on Wednesday and posted a seventh day of declines on Thursday — its longest losing streak in four years, Reuters reported. The index shed 12% over the six sessions through Thursday, ZeroHedge said.

Memory-chip maker Western Digital fell 4.5% in premarket trading Thursday, while Seagate dropped 4.1% and Micron lost 2.8%, according to ZeroHedge. Among the “neocloud” providers, CoreWeave dropped another 6-7% in premarket action after having imploded 15% the prior day.

The rout extended to major tech companies as well. Nvidia, Amazon, Meta Platforms, and Tesla were all lower in premarket trading Thursday, with Apple the only Magnificent Seven name in the green.

**Hot Inflation Adds to Fed Rate-Hike Bets**

The tech selloff has unfolded against a backdrop of stubbornly high inflation data. The US consumer price index for September came in surprisingly strong on Wednesday, putting a Federal Reserve rate hike back on the table, Reuters reported. Producer price data on Thursday also came in hotter than expected, CBS News reported.

The odds of a Fed rate increase at the October 28-29 meeting slid back to around 30% Thursday, ZeroHedge said, after spiking to 58% following the CPI release. However, the probability of a hike at the December meeting jumped to 74.3%, from 50.2% a month ago, according to CME FedWatch data cited by CBS News.

Despite the inflation readings, longer-dated US Treasury yields fell sharply as investors sought safe havens. The 10-year yield dropped as much as 10 basis points to 5.08% on Thursday — its lowest since late September — in what Reuters called one of the best days of the year for Treasuries.

**Safe Havens Benefit**

The flight to safety supported gold, which rose 1.3% to around $4,158 an ounce on Thursday, ZeroHedge reported. The dollar weakened for the first time in several sessions, with the Bloomberg Dollar Spot Index down 0.3-0.4%. Brent crude fell nearly 2% to $104 a barrel amid the risk-off tone.

**JPMorgan Kick-Off Misses on FICC**

Bank earnings season began on a sour note Tuesday when JPMorgan Chase reported third-quarter fixed-income, currencies and commodities sales and trading revenue of $5.37 billion, missing the $6 billion estimate, ZeroHedge reported. The bank did raise its full-year net interest income forecast to about $106.2 billion, above consensus.

UnitedHealth Group rose 2% after raising its full-year adjusted earnings guidance, the sources noted.

**Rotation Out of Tech Picks Up**

Wall Street’s resilience on Thursday was notable given the ferocity of the Asian selloff. The Dow Jones Industrial Average rose 1% to its highest in a month, Reuters reported, while the S&P 500 edged up 0.3% and the Nasdaq Composite closed marginally higher. That marks a dramatic rotation away from technology toward other sectors.

Deutsche Bank calculated that since mid-2024, rotation trades out of tech have lasted an average of 67 days and triggered an average tech-sector drawdown of 16.6%, according to Reuters.

Friday delivered another leg lower, with the Nasdaq falling 2.1%, ending the week down more than 3% and posting its worst weekly performance since June, CBS News reported. The S&P 500 fell 1.1% and the Dow shed 0.3% on Friday.

Chipmakers were again the hardest hit: Micron fell 5.6%, Advanced Micro Devices dropped 6%, Broadcom lost 4.5%, and Intel slid 5.8%.