Tech stocks tumble as AI debt fears rattle Wall Street

Technology stocks suffered significant losses on Friday as investors grew increasingly concerned about the mounting debt and debt-related financing of companies involved in artificial intelligence (AI) and the development of data centers to support AI models. The tech-heavy Nasdaq Composite fell by over 650 points, or 2.4%, to 26,116, signaling its first weekly decline in five weeks. The broader S&P 500 and Dow Industrial Average also experienced declines of 1.2% and 0.6%, respectively.

The drop in tech stocks was particularly sharp for chipmakers and other technology firms, as investors grew apprehensive about the heavy borrowing required to fund the rapid expansion of AI infrastructure. Companies like CoreWeave, which provide the necessary computing power for AI models, faced substantial pressure. Analysts noted that these neocloud companies were financing much of their capital expenditures through debt and equity issuance rather than cash flow, leading to concerns about the growing debt burden.

Shares of CoreWeave plummeted by 12% on Friday, marking a nearly 26% decline for the week as investors closely monitored the company's mounting debt. Similar declines were observed for other tech giants, with Micron Technology falling 4.1%, Advanced Micro Devices dropping 5.1%, Broadcom down 3.6%, and Intel losing 4.7%. In a surprising turn of events, Tesla shares fell 2.8% after the company unveiled a new Roadster sports car capable of hovering in the air.

The broader market was also rattled by growing signs of increasing U.S. inflation, which has moved further away from the Federal Reserve's 2% annual inflation target. Rising bond yields, particularly on the 10-year U.S. Treasury bonds, heightened concerns about inflation and debt levels. Yields remained steady at 5.1% on Friday, despite surges earlier in the month that pushed them to their highest levels in over two decades.

Investors anticipate that the Federal Reserve may raise interest rates at its upcoming meeting on October 28-29, with the odds of a rate hike at the December meeting increasing to 74.3% from 50.2% a month ago. Fed Chairman Kevin Warsh offered no hints during a meeting of financial leaders in Bangkok about potential interest rate policy moves, while noting that the federal funds rate was recently hiked to between 3.75% and 4%, its highest level since December 2025.