AI stock selloff eases as buyers return to tech after rate-driven rout

what happened

Selling aimed at the riskiest AI-linked borrowers slowed on Thursday as buyers came back into technology stocks after a weak start on Wall Street. Lower bond yields also took some pressure off the sector.

Data center operator CoreWeave was down 2% at midday, having dropped as much as 10% earlier in the day and fallen 15% on Wednesday. Its bonds were yielding as much as 16%, and the cost of insuring its debt against default climbed, a sign of strain from higher financing costs. Wednesday's hot US inflation report had highlighted the risks that rising borrowing costs pose to capital-heavy AI firms.

Other names also came under pressure: Nebius fell 5%, Dell Technologies lost 7% and Sandisk slipped 2%. Year to date, according to LSEG data, Nebius is up 112%, Dell 273% and Sandisk 476%. The Nasdaq was down 0.4% on Thursday afternoon, while SpaceX fell 3%. An investor who attended a meeting with Anthropic's leadership said its third-quarter revenue rose 45% from the previous quarter to $16.8 billion, a figure some analysts called disappointing given the company's $2 trillion valuation target.

Ross Mayfield, investment strategy analyst at Baird, said long-term rates above 5% and moving toward 6% are a problem for smaller borrowers, since they make financing much harder for firms outside the largest four hyperscalers.

why it matters

For markets, the episode is a reminder that higher rates are becoming the main test for AI companies. The largest players, including Nvidia, Alphabet, Microsoft, Meta and Amazon, look more resilient thanks to their strong profits, while less profitable and more heavily indebted firms could come under pressure first if yields keep rising.

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