AI boom stumbles over white swan events
QQQ•AI-related stocks fell as inflation and concerns about debt-heavy neocloud companies raised questions about funding for the sector. CoreWeave bonds traded below 85% of face value, while Nvidia and TSMC shares fell 8% and 4%, respectively, over the week.
1. Selloff spreads
Nvidia shares fell 8% and TSMC shares fell 4% over the week, while ASML shares were down nearly 6% on Thursday despite strong orders and a planned capacity increase. The declines followed concerns about neocloud operators and rising inflation, which may push up borrowing costs.
2. Debt concerns
CoreWeave bonds fell to less than 85% of face value as the company sought new sources of capital. CEO Mike Intrator told employees that its deal backlog covers its debt obligations and that markets can sometimes “misunderstand and act irrationally.” CoreWeave has about $50 billion of borrowings.
3. Funding at stake
Neocloud firms such as CoreWeave and Nebius are expected to account for about one-fifth of compute capacity by 2030. If they struggle to access markets, chipmakers or AI labs such as OpenAI may need to find other funding sources or buy more GPUs themselves. Broadcom CEO Hock Tan said capital and funding, rather than semiconductor or power shortages, could be the major constraint on AI’s expansion.
