S&P 500 and Nasdaq close sharply lower as AI stock selloff weighs on markets

US stocks closed sharply lower Friday as renewed selling in artificial intelligence companies and semiconductor manufacturers dragged down major indexes, extending a difficult week for technology shares.

The Nasdaq Composite declined 2.15%, while the S&P 500 fell 1.10% to 7,659.44. The Dow Jones Industrial Average slipped 0.36% to around 52,002, with technology stocks bearing the brunt of the losses.

The declines reflected growing concerns about the sustainability of the AI infrastructure boom, particularly as companies increasingly rely on borrowed money to finance expensive data center projects.

Rising oil prices also weighed on investor sentiment, adding to inflation concerns following Wednesday’s stronger than expected US consumer price report.

AI infrastructure debt concerns deepen technology selloff

The latest decline follows several sessions of pressure on chipmakers and companies providing computing infrastructure for artificial intelligence.

Nvidia backed CoreWeave remained a focus of investor concerns after a sharp selloff in its corporate bonds pushed yields above 15%, reflecting growing doubts about the risks associated with heavily indebted AI infrastructure providers.

Other cloud infrastructure companies, including Nebius and IREN, also came under pressure during Friday’s session as investors reassessed the financing behind large scale computing projects.

Semiconductor stocks extended their losses, with Intel declining 5.8% and Micron Technology falling 5.6%.

The weakness follows a strong rally in AI related equities earlier this year, driven by expectations of continued investment from major technology companies.

However, rising financing costs have raised questions about whether the revenues generated by AI services can justify the scale of infrastructure spending.

The concerns have also spread to private AI companies. Reuters reported Thursday that some Anthropic investors are considering a valuation of approximately $1.5 trillion for its planned November IPO, down from earlier expectations near $2 trillion, despite the company’s rapid revenue growth.

Rising oil prices and inflation add pressure to Wall Street

The technology selloff came as oil prices surged more than 3% Friday amid concerns about supply disruptions in the Middle East.

Higher energy costs have added to inflation worries after September US consumer prices rose 0.6% monthly and 3.7% annually, exceeding expectations.

The inflation report raised concerns that the Federal Reserve could maintain restrictive monetary policy or increase interest rates further, potentially making financing more expensive for companies investing heavily in AI infrastructure.

Higher borrowing costs also weigh on growth stock valuations by reducing the present value of expected future earnings.

For the week, the Nasdaq declined approximately 4.5%, its worst performance since June, while the S&P 500 lost 1.9%. The Dow managed a weekly gain of 0.7%, reflecting relatively stronger performance outside the technology sector.

Despite the decline, the Nasdaq and S&P 500 remain up approximately 12.5% and 11.9%, respectively, this year.

The latest selloff highlights growing investor scrutiny of AI infrastructure spending after months of strong gains in technology stocks.