Red hot CPI report fuels AI rout

U.S. inflation data sent AI stocks tumbling on Wednesday, reflecting investor worries over rising borrowing costs in the capital-intensive sector. CoreWeave, a data center operator, plummeted 16%, while Nebius, an AI infrastructure provider, fell 11%. Cloud computing leader Oracle dropped 9%, and Dell Technologies, an AI server seller, declined 11%.

The declines wiped out about $80 billion in market value. Barclays downgraded Dell and two other enterprise hardware stocks, noting that Dell shares have quadrupled this year, part of an investor binge fueled by AI. CoreWeave, which has issued $22 billion in bonds and $26 billion in loans, saw its 9.625% bond yield spike to 15%.

CEO Mike Intrator insisted the market was irrational, but many remain cautious due to concerns about debt. U.S. interest rates rose following the inflation report, hitting a 30-year yield of 5.63%, a level that could prove problematic for marginal borrowers. The Nasdaq closed 2% lower, with major hyperscalers like Alphabet, Microsoft, Meta, and Amazon down around 2%.

Despite the strong economics of these firms, investors remain skeptical, recalling past busts like the dot-com meltdown.