Chip index falls for 8 straight sessions in longest losing streak since 2008
Key Facts
The Philadelphia Semiconductor Index ended trading on Friday, October 16, lower for the eighth consecutive session, its longest daily losing streak since October 2008, according to Reuters. The decline coincided with concerns about borrowing to finance the expansion of artificial intelligence infrastructure, while U.S. inflation reports came in above expectations. The index fell 3.83% on Friday alone to close at 11,137.29 points, according to Investing.com. Its cumulative loss since its last gain, on October 6, reached 16% by Friday's close, with declines in every subsequent session. The previous comparable streak also lasted 8 sessions in October 2008, according to the comparison cited by Reuters.
The selloff hit all 30 stocks in the index on Friday, according to Investing.com, extending the decline across its entire membership that day. The index covers the 30 largest U.S.-listed semiconductor stocks and American depositary receipts, according to Nasdaq's definition of its scope. It uses a modified market-capitalization weighting methodology, linking companies' weights in the index to their market values under that approach. In memory stocks specifically, Reuters linked weakness during the week covered by its report to mounting concerns about Chinese competition in the sector. That competitive pressure coincided with concerns about financing AI investment, which featured in the agency's coverage of specialist cloud computing companies.
At the heart of the financing concerns, investors focused on CoreWeave's $50 billion in debt, according to a Reuters report published on October 16. The agency said cloud computing companies specializing in AI rely heavily on borrowing to finance purchases of chips and land and secure the power needed for their projects. That spending precedes data center revenue, as the companies use financing to cover infrastructure needs before revenue begins to flow. Meanwhile, CoreWeave's backlog of contracted future revenue stood at about $104.2 billion at the end of the second quarter, according to the same report. The company had nevertheless yet to turn a profit as of the report's publication, according to London Stock Exchange Group data cited by Reuters in its coverage of the company's finances.
CoreWeave Chief Executive Mike Intrator responded in a memo to employees seen by Reuters, saying markets can "misunderstand and act irrationally" and stressing the strength of demand for the company. In chip manufacturing, Taiwan Semiconductor Manufacturing Co. reported third-quarter revenue of $46.72 billion. That represented an increase of 41.2% from a year earlier, according to the company's statement, as sector shares faced a sustained selloff. Net income and diluted earnings per share, both denominated in Taiwan dollars, each rose 68.7% year on year over the same period. Chief Financial Officer Wendell Huang attributed the company's third-quarter performance to "strong demand for our leading-edge process technologies," according to the statement presenting the quarterly results.
On the economic backdrop, Reuters reported that U.S. consumer and producer price inflation reports came in above expectations during the week covered by its report. The reports showed price pressures spreading beyond energy, according to the agency, coinciding with pressure on AI stocks. In a separate regulatory development, Taiwan plans to add AI servers to its list of goods subject to export controls, according to Bloomberg in a report carried by The Straits Times. The planned additions also include advanced semiconductors, as part of Taiwan's move to broaden the range of goods subject to those controls. The restrictions are being prepared as chip companies face concerns about Chinese competition in memory, alongside investor anxiety over borrowing to finance infrastructure.
Looking ahead, Taiwan Semiconductor Manufacturing Co. forecast fourth-quarter revenue of between $52.3 billion and $54.3 billion, according to its published guidance. The bottom of that range exceeds its reported third-quarter revenue, with management stressing strong demand for its leading-edge process technologies. On monetary policy, Reuters reported on Friday that markets increasingly expected the Federal Reserve to leave interest rates unchanged in October. Expectations for a hold strengthened after consumer and producer price reports exceeded forecasts during the week, according to the agency's coverage of economic and market developments. The Federal Open Market Committee is scheduled to hold its next meeting on October 27 and 28, 2026, according to the calendar published on the Federal Reserve's website.