Nasdaq loses 4.5% for week as AI funding concerns mount
Key Facts
The Nasdaq Composite closed Friday, October 16, down 2.1% at 26,140.03 points amid concerns about artificial intelligence companies' ability to keep funding their expansion, according to the Associated Press. It lost 4.5% over the week ended that session, underperforming the broader U.S. stock index. The index shed 1,226.14 points over the week as technology stocks faced pressure linked to borrowing and spending. It was the Nasdaq's first weekly loss in 5 weeks, according to the agency's market coverage. It was also its biggest weekly loss since June, as the cost of financing AI expansion emerged among investors' concerns.
U.S. indexes diverged over the same week, with the broader S&P index losing 1.9%, according to the Associated Press. The Dow Jones, meanwhile, ended the week up 0.7%, posting gains while the other two indexes declined. The Nasdaq's decline was steeper than the S&P's, with pressure on technology stocks featuring prominently in coverage of the session. On investor sentiment, Benzinga reported that CNN's Fear and Greed Index moved into "extreme fear" territory on Friday. The index registered 18, compared with a previous reading of 30, as a week of declines in broader U.S. equities and technology stocks drew to a close.
The Associated Press linked pressure on technology stocks to concerns over AI companies' continued borrowing and spending after they tapped debt markets to finance their expansion. Those concerns came as bond yields rose, increasing financing costs for corporate borrowers. In its assessment of the week's pressures, the Nasdaq Economic Research Institute listed AI infrastructure companies' ability to generate revenue among the concerns. The concerns cited by the institute centered on whether that revenue could cover companies' costs as infrastructure funding needs persisted. The pressures identified by the agency and the institute thus encompassed both debt financing for expansion and the returns companies could generate to cover its costs.
Chip stocks were among Friday's decliners, with Micron Technology falling 5.6%, according to the Associated Press. AMD fell 6% in the same session, a steeper decline than Micron's. Both companies' shares fell in the session that capped the Nasdaq's losing week, amid pressure tied to AI financing. Alongside concerns over revenue and costs, the Nasdaq Economic Research Institute cited potential Chinese competition among the factors weighing on the week. Its reference followed an announcement by a prominent Chinese memory chip producer that it was close to manufacturing advanced chips, adding industry competition to the concerns surrounding AI infrastructure companies.
Against that economic backdrop, the U.S. producer price index for final demand rose a seasonally adjusted 1.3% in September from the previous month, according to the U.S. Bureau of Labor Statistics. The increase accelerated from August, when the monthly rise was 0.5%, according to the revised reading in the September release. Producer prices thus recorded a larger monthly increase than in the previous month, as both goods and services prices rose. On an unadjusted annual basis, producer prices rose 6.3% over the period ended in September. That inflation reading covered the month before the Federal Reserve's next meeting, scheduled for October, amid market concerns about rising financing costs.
Energy led the rise in final-demand goods prices in September, according to details of the U.S. Bureau of Labor Statistics' producer price release. The energy component jumped 10.8% from the previous month and was the biggest driver of the increase in goods prices that month. Overall final-demand goods prices rose 2.6% from the previous month, an increase led by energy. Final-demand services prices rose 0.8% month on month, joining goods in moving higher during September. Goods prices rose faster than services prices, while the jump in the energy component exceeded the overall increase in goods prices, according to the breakdown of the monthly rise in the headline producer price index.
Upcoming events to watch include Meta's and Tesla's quarterly results on Wednesday, which the Nasdaq Economic Research Institute listed among the highlights of the week following the decline. The results on the institute's calendar cover the two companies' third-quarter operations, following a week in which concerns over AI companies' revenue and costs came to the fore. On monetary policy, the Federal Reserve holds its next meeting on October 27–28, according to its published meeting schedule. That will be followed by the October producer price release on November 13, according to the date set by the U.S. Bureau of Labor Statistics. The report is scheduled for release at 8:30 a.m. U.S. Eastern Time, marking the next opportunity to track producer prices after September's reading.