AI infrastructure firms slump as US rate hike bets rise
QQQ•Debt-heavy AI infrastructure stocks fell as expectations of higher interest rates raised concerns about financing the industry's buildout. Nebius dropped 15.1%, CoreWeave 9.5%, and Oracle 7.2%.
1. AI shares fall
Shares of neocloud firms Nebius and CoreWeave fell 15.1% and 9.5%, respectively. Data center operators Applied Digital and IREN dropped 8.8% and 9.9%, while Oracle shares fell 7.2% and most of its dollar bonds also declined.
2. Rates and financing
The prospect of a second Federal Reserve rate hike as soon as this month rose after hot consumer price data. Ten-year Treasury yields climbed 3.6 basis points and two-year yields rose 7.2 basis points. Higher rates mean elevated borrowing costs for firms building data centers and buying AI chips. Debt-insurance costs for some AI companies, including Oracle and CoreWeave, surged to record highs.
3. Server makers retreat
Dell shares dropped 10.3% and HPE fell 6.4% after Barclays downgraded both stocks to equal-weight from overweight. Barclays said, “Valuations have run, commodity costs have helped revenues, and we don't see a meaningful AI inflection yet.”
