Red hot CPI report fuels AI rout
QQQ•Major AI stocks slumped after a hotter-than-expected US inflation report, and declines among CoreWeave, Nebius, Oracle and Dell erased about $80 billion in market value.
1. AI stocks slide
Major AI stocks fell after the latest hot US inflation report raised concerns about higher borrowing costs for the capital-intensive sector. CoreWeave dropped 16%, Nebius fell 11%, Oracle declined 9% and Dell Technologies lost 11%, together erasing about $80 billion in market value.
2. Borrowing costs weigh
The selloff reflected tighter financial conditions and large gains in some AI beneficiaries. CoreWeave has issued $22 billion of bonds and $26 billion of loans, LSEG data showed; a bond issued in June with a 9.625% yield recently yielded 15%. Barclays downgraded Dell and two other enterprise hardware stocks, noting Dell shares had quadrupled this year.
3. Investors remain selective
Investors generally remained sanguine on the sector, with major players such as Nvidia and the hyperscalers seen as profitable and well managed. But higher rates could make borrowing and construction costlier for less-profitable firms. US rates rose after the inflation report, with the 30-year yield reaching 5.63% before pulling back; the Nasdaq was down 2% on Wednesday afternoon.
