Tech Rout Intensifies as Nasdaq Plunges 6% Amid AI Spending Fears

By / / Breaking News

This update was written automatically with AI from market data and news wire reports, and published without review by a person.

Key Takeaways

  • The Nasdaq 100 plunged more than 6% and the S&P 500 fell 3.7% as a massive sell-off in semiconductor and "neocloud" stocks erased billions in market capitalization.
  • Nvidia (NVDA) shares plummeted 7.3%, marking the chipmaker's steepest single-day decline since April 2025, amid growing skepticism over the sustainability of AI infrastructure spending.
  • Microsoft (MSFT) has reportedly tightened oversight of its AI partners, including Nebius Group (NBIS) and IREN (IREN), following construction delays and $5 billion in lower-than-expected AI capital expenditures.
  • Credit stress reached record levels for CoreWeave (CRWV), with its five-year credit default swaps (CDS) widening to an all-time high of 1164.52 basis points, signaling deep market concern over its debt-funded expansion.
  • ECB President Christine Lagarde warned of a "hard" economic situation driven by the conflicting forces of energy shocks and AI-driven structural shifts, emphasizing the need to maintain tools to prevent runaway inflation.

Tech Giants and AI Infrastructure Under Fire

The technology sector faced a brutal session on Thursday as investors aggressively repriced the "AI trade." The Nasdaq 100 fell over 6%, while the S&P 500 (SPX) dropped 3.7%, driven by a rout in the semiconductor index which slid nearly 9%. Market sentiment soured following reports that the massive capital investments by hyperscalers may not be yielding immediate returns, coupled with regulatory concerns following recent U.S. midterm election results.

Nvidia (NVDA) was the primary weight on the indices, extending its decline to 7.3%. The sell-off was exacerbated by news that Microsoft (MSFT) is reconsidering its reliance on third-party "neocloud" providers. Shares of IREN (IREN) plunged 18% after reports surfaced of cabling issues and construction delays at its Texas data center campus, while Nebius Group (NBIS) and Nscale also faced increased scrutiny and canceled agreements.

Credit Markets Signal Distress

Beyond equity markets, the credit landscape for AI-linked firms showed significant signs of strain. CoreWeave (CRWV) saw its five-year credit default swaps widen to a record 1164.52 basis points, a level typically associated with distressed debt. Investors are increasingly wary of the company's $50 billion debt load used to finance GPU clusters, especially as yields on its 2031 unsecured bonds climbed toward 16%.

This credit tightening reflects a broader "risk-off" move as the VIX, Wall Street's fear gauge, surged 40% to cross the 23-point threshold. Analysts noted that the "canary in the coal mine" for the AI sector is the rising cost of insuring against defaults for these highly leveraged infrastructure plays.

Central Bank Caution and Energy Data

In Europe, ECB President Christine Lagarde highlighted the difficulty of the current macroeconomic environment. She noted that energy shocks and the rapid adoption of AI are pulling the economy in opposite directions, creating a complex backdrop for monetary policy. Lagarde reiterated that the ECB must remain vigilant and apply necessary tools to ensure inflation does not run away from its 2% target.

On the domestic front, the U.S. EIA reported a natural gas storage increase of 77 Bcf for the week ending October 30. This figure was slightly below the consensus estimate of 78 Bcf, suggesting marginally tighter supply than anticipated. Despite the bullish miss relative to estimates, energy markets remained focused on the broader macro slowdown and the potential for reduced industrial demand.

Geopolitical Tensions Rise

Adding to the market's unease, Iranian state media reported that security chief Mohsen Rezaei delivered a message from Supreme Leader Mojtaba Khamenei to Russian President Vladimir Putin in Moscow. While the contents of the message were not disclosed, the meeting comes amid reports that Russia has deepened its support for Iran via missile launcher deals, further complicating the global geopolitical risk profile.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. We are not financial professionals. The authors and/or site operators may hold positions in the companies or assets mentioned. Always do your own research before making financial decisions.
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