Nasdaq -1.88%: Inflation and CoreWeave Hit AI Stocks
Hot US inflation data sends the Nasdaq down 1.88%. CoreWeave plunges 15% as investors doubt the financing of AI infrastructure.
Key Takeaways
- The Nasdaq falls 1.88 percent to 26,692.87 points, its steepest daily loss since July 23.
- Hot US inflation data fuels bets on further Fed rate hikes and weighs on AI stocks.
- CoreWeave plunges about 15 percent as investors doubt it can refinance its debt.
Wall Street suffers a day when inflation and credit worries collide. The Nasdaq loses 1.88 percent, and the S&P 500 slips 1.11 percent to 7,718.94 points. The Dow Jones stays nearly flat at minus 0.09 percent, at 51,621.48 points. The weakness is concentrated in technology.
Why a rate hike puts the brakes on the AI rally
The trigger is September consumer prices coming in hotter than expected. According to Reuters, the futures-implied chance of a rate hike this month rises from roughly 22 to 37 percent. Costlier money hits hardest the sectors whose profits are expected only years out, and that is exactly where AI sits.
The sector numbers show the pattern. Technology loses 2.6 percent in the S&P 500, communication services 1.78 percent. The Philadelphia semiconductor index gives up 4.3 percent and closes lower for the sixth session in a row. Oracle slides 8.8 percent, and Dell drops 11.4 percent after a Barclays downgrade. Bank of America (BAC) falls 4.8 percent after setting aside $1.2 billion for money-laundering fines. Apple bucks the trend: up 0.5 percent, with a market value above $5 trillion for the first time.
When debt costs more than growth pays
CoreWeave is a big reason AI stocks fare so badly. The cloud provider for AI computing power loses about 15 percent, plus another 3.6 percent after hours. Claudio Kummerfeld at Finanzmarktwelt, citing Bloomberg, describes what is happening in credit: a bond due 2032, placed at par only four months ago, trades below 78 cents on the dollar. Its yield rises to about 15 percent. Credit default swaps, insurance against non-payment, price a default probability above 50 percent over five years.
Gil Luria of D.A. Davidson calls CoreWeave the "subprime tranche" of AI. In his view, borrowing at around 9 percent was still workable, but above that, growth destroys value. Management disagrees. CEO Michael Intrator writes internally that the balance sheet more than covers its obligations and that the market misreads the company. The backlog, he says, secures repayment of secured debt and parent-level liabilities.
Record high a week ago, but the index rests on few shoulders
The setback hits a market resting on a narrow base. According to Reuters, the S&P 500 is up about 13 percent for the year after hitting a record high last week. The median stock in the index is up only about 4 percent. If financing for data centers dries up, the main driver of the index wobbles.
Chip stocks were already under pressure on previous days. What is new is the combination of rate-hike fear and credit stress: bonds of Galaxy Digital and Core Scientific are also losing value, according to Finanzmarktwelt.
What momentum says
Momentum signals a bearish state for CoreWeave (CRWV) on the daily timeframe, while the weekly state is neutral. No data is available for 1 hour and 4 hours. The snapshot shows a price of $65.78. The daily reading matches the bond picture: the downward pressure is not a one-day outlier but has built up beyond a single session.