Concern is growing on Wall Street that AI profits won't flow fast enough to service increasingly expensive loan obligations. For many tech stocks, the bad week ends with another bad day.
The US stock markets closed weaker on Friday. The selloff in tech stocks continued. The Nasdaq technology exchange index lost 2.15 percent to 26,140 points. The broader S&P 500 fell by around 1.1 percent to 7,659 points. The Dow Jones index of standard stocks ended trading with a loss of 0.34 percent at 52,002 points.
Tech-heavy indices were weighed down by renewed concerns about the AI sector. The shares of the data center operator CoreWeave, which is supported by the chip manufacturer Nvidia, fell by twelve percent. Traders cited ongoing concerns about the company's debt load. The shares of chip manufacturers Micron Technology and Intel also fell by more than five percent each. "Whether this is just profit-taking after yesterday's rally or whether there is more to it remains to be seen," said David Morrison, chief analyst at Trade Nation.
Over the course of the week, the S&P 500 fell by almost 1.95 percent and the Nasdaq slipped by 4.48 percent. The Dow, on the other hand, did not go into a tailspin and gained 0.67 percent over the week. Concerns about rising interest rates have put a lot of pressure on AI stocks this week. Investors already have concerns about whether data center operators will become profitable in time to repay their debts. With higher borrowing costs expected, the fears take on new urgency.
A decline in memory chip stocks earlier in the week gave investors "an excuse to reduce their exposure to all AI-related companies," Morrison said. In addition, the Reuters news agency reported, citing insiders, that some investors in the AI company Anthropic are considering a lower valuation for the upcoming IPO in view of rising financing costs.
Earnings season could bring more clarity
Andreas Lipkow from the broker CMC Markets expressed a similar opinion to Morrison: "A countermovement will only become a sustainable upward trend when the fundamental arguments are convincing again." The coming reporting week is likely to be the next crucial stress test. The previous figures from the Taiwanese chip giant TSMC have provided initial positive signals, but have not yet been enough to dispel doubts about the profitability of the enormous AI investments. Now the large US hyperscalers would have to prove that their billion-dollar investments can also generate corresponding returns.
At the same time, bets on an imminent interest rate hike by the US Federal Reserve have recently increased. Rising interest rates make financing large AI data centers more expensive and question the profitability of capital-intensive projects. A partial stabilization in the bond market gave the stock markets some breathing room after the recent pressure on interest rates. Yields on ten-year US government bonds rose only slightly. “However, money is also flowing into government bonds out of concern for the highly valued AI stocks, which is why falling yields alone are not a reason to turn the traffic light back to green,” said Robomarkets strategist Jürgen Molnar.
Among individual stocks outside the AI sector, Netflix shares fell by almost three percent. The streaming service says it has appointed former Disney manager Peter Rice as its new head of programming. Tesla also failed to maintain its initial gains. The electric car manufacturer's shares, which had gained around two percent in earlier trading, lost 2.1 percent. Tesla has unveiled a new edition of its Roadster sports car equipped with rocket engines from SpaceX. Production is scheduled for 2028. However, SpaceX investors were also not convinced: the shares of Elon Musk's space company lost 1.7 percent.
