Global tech sell-off deepens as enthusiasm for AI stocks wobbles

By Hanna Ziady, John Towfighi, CNN

London/New York (CNN) — Global technology stocks sold off sharply Thursday, as a growing list of worries, including rising borrowing costs and tougher competition from China, caused traders to sour on AI investments.

The Nasdaq Composite fell 1.2% shortly after the opening bell. The tech-heavy index posted its worst decline since July on Wednesday, as shares of companies involved in the AI buildout, including semiconductor chipmakers, tumbled.

CoreWeave, a data center and compute provider backed by Nvidia, fell 7% Thursday, after plunging 15.5% Wednesday. Dell fell 8%, after closing 11% lower Wednesday. Nvidia fell 3%, putting it down 10% since hitting a record high earlier this month.

“Worries about the AI buildout, bubbly valuations, lower-than-expected earnings growth at leading US frontier labs, Chinese competition, inflation and rates sent investors running for the covers,” Neil Wilson, a strategist at investment bank Saxo wrote in a note. He pointed to the slowing pace of revenue growth at Anthropic and OpenAI as adding to investor concerns.

Multiple news outlets reported that Anthropic, at an investor presentation ahead of its planned IPO expected in the near future, announced its sales grew 45% to $17 billion last quarter. Growth had more than doubled in the second quarter.

The Nasdaq and S&P 500 opened lower Thursday after fresh data showed wholesale inflation surged in September to its highest level in more than four years. The S&P was down 0.4%.

Further hitting sentiment, C.C. Wei, the CEO of Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest manufacturer of advanced chips, sounded a cautious note during an earnings call Thursday. He told analysts that rising component prices and macroeconomic uncertainty was challenging demand in some segments of the market.

The company’s shares finished 2% lower despite bumper earnings, contributing to a 3.5% decline in an index of Taiwan’s technology stocks.

South Korea’s Kospi led declines in Asia, finishing 7.6% lower on sharp drops in chipmakers SK Hynix (-11%) and Samsung Electronics (-9.5%). The scale of the decline triggered a circuit breaker, temporarily halting trading on the exchange — a frequent occurrence this year in a stock market dominated by just two stocks. Japan’s Nikkei finished 4.9% lower, with Hong Kong’s Hang Seng down 1%.

The Kospi, heavily weighted in chipmaker titans Samsung and SK Hynix, closed at a six-month low, erasing all of its gains since April. The Kospi in June was up as much as 116% on the year, but has since slumped more than a third, leaving year-to-date gains at 32%.

Adding to market jitters is growing competitive pressure from China, after Chinese semiconductor CXMT announced progress on advanced memory chips, raising doubts about the potential profitability of companies in the US and South Korea.

A closely watched index of semiconductor stocks dropped more than 3% on Thursday, putting it down 23% since a peak in June.

An index of technology stocks in Europe fell 3% in early afternoon trade locally, with Dutch semiconductor manufacturer ASML down nearly 5%.

Rising rates and AI debt unsettle investors

The global retreat in technology stocks followed a sharp sell-off on Wall Street, after a strong US inflation report bolstered worries that rising interest rates will make it more expensive for companies to fund AI investments. Many AI companies are already heavily indebted.

CoreWeave, a so-called neocloud, is under scrutiny from analysts as rising interest rates complicate the outlook for the company, which has tens of billions of dollars of debt on its balance sheet.

Sentiment soured after research firm Gartner published a report on Wednesday forecasting that over 80% of neocloud providers will cease operations by 2030, due to costs and lack of a unique business model.

Shares of CoreWeave, which went public in 2025, have fallen 66% since their peak shortly after the IPO. Nebius, another neocloud provider, slumped 8% on Thursday after falling 10% on Wednesday.

Wall Street is also grappling with uncertainty over the political climate around data centers heading into the midterm elections. Investors are betting on an enormous buildout, and data center moratoriums or other slowdowns could hurt forecasts for returns on investments.

AI stock valuations have been volatile throughout the year. The biggest hyperscalers – Anthropic and OpenAI – remain privately traded, so investors look for clues about AI demand elsewhere. Any report that hints about slumping demand or higher-than-expected costs of building out AI infrastructure has frequently sent stocks on a rollercoaster ride.

“A slowdown in the AI infrastructure build out would imply a sharp slowdown in US growth expectations,” Mohit Kumar, chief European economist at Jefferies said in a note. The US is spending more on AI annually as a percentage of GDP than it did on building railways across the country in the 1800s, he noted.

But fears of a bubble suddenly popping have tended to be overblown.

“We expect the earnings season to justify that earnings and demand remain robust,” Kumar added. He cautioned, however, that Jefferies “would look to take some chips off the table” ahead of the midterms because a potential Democrat win in Congress “would be considered negative for the sector.”

Treasury bonds rallied, pushing yields lower, as investors unnerved by the drop in AI stocks flocked to the safety of bonds.

The-CNN-Wire
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