AI Stock Sell-Off Deepens as CoreWeave Shares Slide

Global technology stocks extended their losses on Thursday as investors grew increasingly concerned about rising borrowing costs, elevated Artificial Intelligence valuations, mounting debt among AI infrastructure providers and intensifying competition from China.

The Nasdaq Composite fell 1.2% shortly after the opening bell, following its worst decline since July on Wednesday. The S&P 500 also opened lower, dropping 0.4%, as fresh data showed US wholesale inflation surged in September to its highest level in more than four years.

Companies involved in the AI infrastructure boom faced particularly heavy selling. CoreWeave, a data center and computing provider backed by Nvidia, fell 7% on Thursday after plunging 15.5% in the previous session. Dell dropped 8% after closing 11% lower on Wednesday, while Nvidia declined 3%, extending its losses to 10% since reaching a record high earlier in the month.

The latest sell-off reflects growing uncertainty over whether the substantial investments being made in artificial intelligence will generate sufficient revenue and profits to justify the industry’s high valuations.

AI Stock Sell-Off Spreads Across Global Markets

Investor confidence weakened as concerns about AI spending, slowing revenue growth, inflation and interest rates converged. Neil Wilson, a strategist at investment bank Saxo, said the combination of these risks was prompting investors to reduce their exposure to technology stocks.

Wilson also highlighted concerns about the pace of revenue growth at leading US AI developers Anthropic and OpenAI. Both companies remain privately held, making it difficult for public-market investors to assess their financial performance directly.

As a result, investors often examine developments at publicly traded semiconductor manufacturers, cloud computing providers and data center operators to gauge the health of the wider AI industry.

Any indication that demand is slowing or the cost of building AI infrastructure is rising faster than expected can trigger sharp market reactions. Thursday’s declines demonstrated how quickly concerns about individual companies can spread across the broader technology sector.

CoreWeave and Other AI Infrastructure Providers Face Growing Pressure

CoreWeave has emerged as a focal point of the downturn because of its exposure to AI computing demand and its substantial financing requirements. The company provides data center capacity and computing services used for demanding workloads, including AI development and deployment.

However, expanding this infrastructure requires significant investment in computing equipment, facilities, electricity and supporting systems. CoreWeave carries tens of billions of dollars in debt, making its financial outlook particularly sensitive to changes in borrowing costs and investor confidence.

CoreWeave shares have fallen 66% from their peak shortly after the company’s initial public offering in 2025, according to the figures in the report.

Nebius, another provider of AI-focused cloud computing infrastructure, also came under pressure. Its shares declined 8% on Thursday after falling 10% on Wednesday.

The sell-off highlights concerns about the financial sustainability of companies that must spend heavily to expand computing capacity while relying on continued growth in AI demand to support their investments.

Gartner Forecast Raises Questions About Neocloud Business Models

Investor concerns intensified after research firm Gartner published a report on Wednesday forecasting that more than 80% of neocloud providers would cease operations by 2030 because of high costs and a lack of distinctive business models.

Neocloud providers specialise in delivering computing infrastructure, often designed to meet the demanding processing requirements of AI workloads. Their services have become increasingly important as companies and AI developers seek access to advanced computing capacity.

However, the business model can require substantial upfront investment in expensive hardware and data center infrastructure. Providers must also manage operating expenses and secure enough customer demand to justify the cost of expansion.

Gartner’s forecast added to uncertainty about which companies will ultimately be able to operate profitably in the increasingly competitive AI infrastructure market. It does not mean that every provider will fail, but it highlights the financial and commercial challenges facing the sector.

For investors, the key question is whether demand for AI computing will grow quickly enough to support the industry’s investment commitments and whether individual providers can differentiate their services from competitors.

September Inflation Fuels Fears of Higher Interest Rates

Stronger US inflation data added another source of pressure to technology stocks. Wholesale inflation surged in September to its highest level in more than four years, reinforcing concerns that the Federal Reserve could keep monetary policy restrictive for longer.

Higher interest rates can increase financing costs for companies undertaking large infrastructure projects. They can also reduce the present value investors assign to expected future earnings, placing additional pressure on growth-oriented stocks.

These effects are particularly relevant for AI infrastructure providers because they often require significant capital before their investments generate returns. Companies with substantial debt may face additional pressure if borrowing costs remain elevated.

The inflation report therefore intensified an existing debate about whether the potential returns from AI investments will justify their cost. Investors are increasingly examining both the strength of demand and the financial resources required to sustain expansion.

Chinese Semiconductor Advances Intensify Competition

Growing competition from China has added to concerns about the profitability of established US and South Korean semiconductor companies.

Chinese semiconductor manufacturer CXMT announced progress in advanced memory chips, raising questions about the competitive position of existing industry leaders. Memory chips are an important component of AI computing systems, and improvements in competing products could influence pricing, market share and profit margins.

The development has increased uncertainty for companies that have benefited from strong demand for AI-related hardware. If Chinese manufacturers make further technological advances, established suppliers could face additional competition in parts of the semiconductor market.

A closely watched semiconductor stock index fell more than 3% on Thursday, extending its decline to 23% from its June peak.

The pressure on chipmakers also affected Asian markets, where major semiconductor companies account for a significant share of benchmark indices.

South Korea’s Kospi Falls to a Six-Month Low

South Korea’s Kospi recorded one of the steepest declines among major global stock markets, falling 7.6% on Thursday as semiconductor shares came under heavy selling pressure.

• SK Hynix: Shares plunged 11%.
• Samsung Electronics: Shares dropped 9.5%.
• Japan’s Nikkei: Declined 4.9%.
• Hong Kong’s Hang Seng: Fell 1%.
• European technology stocks: An index tracking the sector dropped 3% in early afternoon trading.
• ASML: The Dutch semiconductor equipment manufacturer fell nearly 5%.

The Kospi closed at a six-month low, erasing its gains since April. The index had risen as much as 116% during June on a year-to-date basis, but subsequently surrendered more than a third of its value from its peak, leaving its year-to-date gains at 32%.

The sharp decline triggered a circuit breaker, temporarily halting trading on the exchange. The development illustrated the vulnerability of a market heavily influenced by the performance of Samsung Electronics and SK Hynix.

Political Uncertainty Adds to Data Center Investment Risks

Investors are also assessing the political environment surrounding data center construction ahead of the US midterm elections. The AI industry’s growth expectations depend partly on the continued expansion of computing infrastructure, which requires significant investment in facilities, electricity and supporting systems.

Proposals to restrict or delay data center projects could affect companies’ expansion plans and reduce the expected returns on infrastructure investments. Any slowdown in construction could also influence demand for chips, servers and related equipment.

Mohit Kumar, chief European economist at Jefferies, warned that a slowdown in AI infrastructure investment could lead to a sharp reduction in US economic growth expectations.

Kumar noted that annual AI spending in the United States, measured as a share of gross domestic product, exceeds the comparable share spent on building railways across the country during the 19th century.

His comparison highlights the scale of the current investment cycle and the potential economic implications if spending slows significantly.

Kumar nevertheless said Jefferies expected the upcoming earnings season to demonstrate that earnings and demand remained robust. He also indicated that the firm would consider reducing some exposure ahead of the midterm elections, noting that a potential Democratic victory in Congress could be viewed negatively for the sector.

Treasury Bonds Rally as Investors Seek Safety

The decline in technology stocks prompted investors to move towards the relative safety of US Treasury bonds, pushing yields lower.

The shift illustrated how market sentiment can change rapidly when investors become concerned about the outlook for growth-oriented assets. While higher inflation can put upward pressure on bond yields by increasing interest-rate expectations, a sharp equity sell-off can encourage demand for government bonds.

The latest movement also reflected uncertainty about the balance between persistent inflation, borrowing costs and the financial risks associated with the AI investment boom.

What the AI Stock Sell-Off Means for Investors

The latest market decline underscores the risks facing companies whose growth depends on continued expansion in AI infrastructure. High valuations, substantial debt, rising financing costs and competition from China are combining to make investors more selective about their exposure to the sector.

However, the sell-off does not necessarily mean that demand for AI technology is collapsing. Some market participants continue to expect strong earnings growth, with upcoming corporate results likely to provide further evidence about spending patterns and business performance.

Investors will be watching revenue growth at AI developers, semiconductor demand, data center investment plans and changes in interest-rate expectations. Developments in US policy ahead of the midterm elections could also influence infrastructure expansion.

For now, the market is reassessing how much investors should pay for AI-related growth and how much financial risk companies can take on to meet expected demand. Whether the latest declines develop into a prolonged downturn or prove to be a temporary correction will depend on earnings performance, financing conditions and the industry’s ability to turn heavy investment into sustainable returns.