Wall Street's bet on artificial intelligence ran straight into an oil shock this week, and more than $1 trillion in technology market value disappeared in the collision. Investors are asking whether the AI boom's enormous infrastructure spending can survive higher borrowing costs.
The Nasdaq 100 fell 5.5% for the week, its worst weekly performance since April 2025, when tariff turmoil shook markets. The index has shed nearly 6% since closing at a record high on October 6 and finished the week at its lowest level since mid-September.
Chips take the heaviest hit
Semiconductor stocks bore the brunt of the selloff. The Philadelphia Semiconductor Index fell for an eighth consecutive session — its longest losing streak since 2008 — and is down roughly 16% over that run, shedding about $2 trillion in chip-market value. The index alone dropped 3.8% on Friday, October 16.
AI cloud provider CoreWeave became the market's cautionary tale. Its shares fell almost 12% on Friday, extending the weekly decline to 25% — the worst week since November last year — and leaving the stock more than 50% below its year-to-date high.
Yields on some CoreWeave bonds briefly topped 15%, and the company's total debt has grown past $51 billion.
The worry, analysts say, has shifted from whether compute demand exists to whether the returns justify the borrowing.
$110 oil fans the flames
Brent crude surged to around $110 a barrel, its highest level since May 2026, as Middle Eastern supply disruptions tightened the market. West Texas Intermediate climbed 3.8% on Friday to $101.71.
The energy spike reignited inflation fears after hotter-than-expected US inflation data — wholesale prices posted their biggest jump since 2022, and consumer inflation remains well above the Federal Reserve's 2% target. The 10-year US Treasury yield rose to 5.097%.
Higher-for-longer rate expectations hit capital-hungry AI infrastructure projects hardest. Companies spending billions today on data centers and computing power, with the payoff arriving later, look far less attractive when money gets expensive.
The S&P 500 declined 2% for the week, its worst since June, while the Dow managed a 0.7% gain as energy stocks offset tech losses.
Earnings will decide what comes next
Five companies — Microsoft, Nvidia, Meta, Apple and Alphabet — produced 93% of the S&P 500's gains since July. Their upcoming earnings reports will answer the question hanging over the market: whether AI revenue supports capital expenditure at current levels.
Some investors are already buying the dip. Cathie Wood's ARK Investment Management increased its positions in CoreWeave and Cerebras Systems. Fed Chairman Kevin Warsh avoided signaling near-term rate shifts at a forum in Bangkok, and traders now price roughly an 82% chance of a hold at the October 27–28 meeting.
By Hamza Faisal
