AI Stocks Sink 10% in Worst Weekly Drop Since July as Inflation Data Rattles Markets

A surge in inflation data and mounting concerns over AI sector borrowing costs sent technology stocks sharply lower last week, with the Nasdaq posting a 4.5% weekly decline that broke a four-week winning streak and marked the index's worst weekly performance since June.

The VanEck Semiconductor ETF fell 10% for the week, its steepest single-week drop since July, while the iShares Semiconductor ETF extended a losing streak to nine consecutive sessions — the longest such stretch in more than a decade.

The sell-off accelerated Wednesday after September's consumer price index rose 3.7% year over year, above the 3.6% analysts had expected. Core inflation also came in hotter than anticipated. Thursday's producer price index offered little relief, jumping 1.3% for the month and 6.3% annually — the largest annual and monthly gains since March 2022 and December 2022, respectively.

The S&P 500 declined 2% on the week. The Dow Jones Industrial Average moved in the opposite direction, gaining 0.7% as investors rotated into healthcare, consumer staples, and other sectors with less direct exposure to the AI buildout.

Broadcom CEO Hock Tan warned Monday that access to capital could become the industry's next major constraint, a concern that found immediate expression in the debt markets. CoreWeave, whose total debt has risen to more than $51 billion, saw its shares plunge 25% last week, while its corporate bond yields and credit default swaps spiked sharply.

Memory chip stocks were also caught in the downdraft. Micron, Sandisk, Western Digital, and Seagate all declined after Chinese rival CXMT announced progress on a more efficient chip structure, raising investor concerns about increased competition and a potential supply glut in the sector.

The cybersecurity segment was among the hardest hit within technology. Palo Alto Networks lost more than 18% on the week, while CrowdStrike fell more than 17%. Reports that OpenAI is in early talks to acquire Trail of Bits, a move that analysts say would expand the AI company's cybersecurity aspirations, added pressure to the sector and intensified the AI trade crossfire.

Not every technology name suffered equally. Meta Platforms rallied after releasing its latest AI models — Muse Wonder and the more advanced Muse Wonder Full — on Monday. Wells Fargo said the models rank among the industry's best, behind only Anthropic's Claude Opus 5.5. Microsoft closed at a record high Tuesday for the first time in nearly a year, completing a recovery after shares had previously fallen more than a third on concerns about AI spending and Copilot's competitiveness. Both stocks still finished the week down more than 1% each. Salesforce was the week's standout in large-cap tech, gaining 5% and rising 65% from its 52-week low of $146 set in June, though it remains down 9% year to date.

Bank earnings offered a measure of relief. Goldman Sachs reported equities trading revenue surging 72% in the third quarter, with investment banking fees rising 21% and asset and wealth management results exceeding expectations. Shares gave back an early gain despite the strong results, reflecting what analysts described as broader investor concern about the economic outlook rather than company-specific performance.

Higher inflation, partly fueled by elevated oil prices, threatens to push borrowing costs higher and complicate the capital-intensive AI infrastructure buildout across the industry — a dynamic that will be closely watched in the weeks ahead as Federal Reserve policymakers weigh their next move on interest rates.

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