Nasdaq Composite falls 2.1% Friday as chips slide, AI financing pressures mount
Key Facts
The Nasdaq Composite fell 2.1% on Friday, October 16, according to the Associated Press, as chip stocks declined and debt pressures weighed on CoreWeave alongside accelerating U.S. inflation. Investor's Business Daily said the decline pushed the index below its 50-day moving average. The Nasdaq 100 fell 2.5% in the same session, according to the newspaper's closing market coverage. Among semiconductor stocks, Micron Technology fell 5.6%, while Advanced Micro Devices lost 6%, according to the Associated Press. The S&P 500 lost about 2% over the week ended Friday, the news agency reported.
The market losses followed an acceleration in U.S. consumer price increases in September, according to Bureau of Labor Statistics data. The headline index rose a seasonally adjusted 0.6% month on month, compared with a 0.4% increase in August. Annual consumer inflation reached 3.7% in September, the bureau said, with higher gasoline prices accounting for more than half the headline index's monthly increase. Core consumer inflation rose 0.3% month on month in September, according to Benzinga. That exceeded expectations for a 0.2% increase, the website said, adding a surprise in the core reading to the acceleration in the headline index.
Producer price data also showed an acceleration, with final-demand prices rising 1.3% month on month in September, compared with 0.5% in August, according to the Bureau of Labor Statistics. Final-demand producer prices rose 6.3% year on year in September. The bureau attributed more than 80% of the increase in final-demand goods prices to energy, whose prices rose 10.8% during the month. Against the backdrop of the inflation releases, Kevin Warsh was asked on Friday about raising interest rates, according to Benzinga. Warsh replied, "I don't get ahead of meetings," leaving his position tied to discussions at upcoming meetings.
At CoreWeave, Reuters put the company's debt burden at $50 billion, amid concerns over the rising cost of financing AI expansion. The yield on its dollar bond maturing in October 2031 briefly exceeded 16% on Thursday, according to the news agency. The cost of insuring the company's debt also exceeded 1,000 basis points during the week covered by the report, reaching record levels. In another offering, bonds the company sold in June carried a yield of 9.675% at issuance, according to a Reuters report. The yield on those bonds rose to 15% during the week amid a selloff in the company's debt.
Risks identified by investors who spoke to Reuters included the potential obsolescence of graphics processing units purchased for expansion projects. Their concern was that these processors could become obsolete before new data centers could open their doors. Technology analyst Dan Ives, in remarks reported by the news agency, pointed to the debate over data center permitting. He added that the debate over electricity prices gave investors another reason to hold back amid concerns surrounding the expansion. Still, Evercore analysts maintained their "outperform" rating on CoreWeave shares despite the selloff, according to Reuters.
The Federal Reserve holds its next meeting on October 27 and 28, according to its published meeting schedule, following the September data and Warsh's latest remarks. The next consumer price report is due after that meeting, with the Bureau of Labor Statistics setting its release for November 10. The report is scheduled for release at 8:30 a.m. U.S. Eastern Time, according to the bureau's announcement. The Federal Reserve's December meeting will take place on December 8 and 9, according to the official schedule. The December meeting includes the release of the Summary of Economic Projections, bringing together monetary policy discussions and the publication of forecasts.