AI Debt Concerns Drive Chip Sell-Off Despite Nvidia CEO Reassurance

Nvidia CEO Jensen Huang told Bloomberg that he remains optimistic and that CoreWeave's cost of capital is decreasing, a statement aimed at calming markets as concerns over artificial intelligence debt intensify. The comments come amid a broader sell-off in semiconductor stocks, where anxiety over heavy leverage has spread beyond chipmakers to industrial and financial sectors.

As of 11:38 AM ET, the Dow Jones Industrial Average was up 0.98% to 52,126, bucking the broader tech weakness. The S&P 500 was up 0.10% to 7,727, while the Nasdaq Composite fell 0.36% to 26,600. This divergence reflects a rotation into safer assets, with healthcare stocks leading sector gains while energy and technology shares declined. Gold rose 1.18% to $4,154.09, and the 10-Year Treasury yield stood at 5.10%, down 1 basis point from the previous session.

The pressure on AI-related equities was exacerbated by specific corporate news. Vertiv Holdings shares dropped approximately 6% after two analysts lowered their price targets for the stock. CoreWeave continued its decline as worries over capital costs persisted. These fears extended to industrial names like Caterpillar, which slid as investors unwound the premium previously applied for data-center power infrastructure. In the financial sector, PNC Financial Services Group wobbled following a third-quarter revenue miss against estimates. Conversely, Abercrombie & Fitch reached a 52-week high, highlighting the mixed nature of market performance.

Macro data also contributed to the volatility. Stocks had fallen in the prior session after Core Price Index data revived concerns about Federal Reserve rate hikes. The latest Producer Price Index report showed wholesale prices rising 6.3% year-on-year, a figure described as hotter than expected. This inflationary backdrop coincided with developments in Chinese chipmaking that had already placed semiconductors under pressure before news emerged that CoreWeave's bond yields had touched 15%.

The surge in bond yields for CoreWeave fueled anxiety about the sustainability of heavy AI debt, spooking the market. Huang's intervention via Bloomberg represents an attempt to restore confidence in the sector's financial health. The current volatility underscores the significant weight of AI firms in the broader market; these companies make up around 40% of the S&P 500, and technology exposure touches many sectors. Investors are being reminded to assess their exposure to AI, as ripples in this sector can have a substantial impact on diversified portfolios.