Key facts
- AI infrastructure firms Nebius and CoreWeave fell 11% and 16% respectively.
- Oracle shares dropped 9%, and Dell Technologies fell 11%.
- The declines erased approximately $80 billion in market value.
- Barclays downgraded Dell and two other enterprise hardware stocks.
- A CoreWeave bond issued in June yielding 9.625% recently yielded 15%.
- US interest rates rose following hot inflation data, with the 30-year Treasury yield reaching 5.63%.
Major AI stocks slumped on Wednesday following a hot US inflation report, intensifying investor concerns about the risks of rising borrowing costs in the capital-intensive sector. Data center operator CoreWeave fell 16%, AI infrastructure provider Nebius dropped 11%, cloud computing giant Oracle declined 9%, and AI server seller Dell Technologies was down 11%, collectively erasing about $80 billion in market value.
Barclays downgraded Dell and two other enterprise hardware stocks, noting that Dell shares have quadrupled this year. The cost of insuring debt against defaults for some AI companies surged, with a CoreWeave bond issued in June yielding 9.625% recently yielding 15%.
"We're getting a whole lot of information suggesting that the largest AI companies may not be generating the earnings or revenue people anticipated, and I think that makes everyone nervous about companies like CoreWeave," said Kim Forrest, chief investment officer at Bokeh Capital Partners.
US interest rates rose following the inflation data, pushing the 30-year Treasury yield as high as 5.63% before pulling back. "I do think long rates above 5% and creeping towards 6% is a problem for the marginal borrower," said Ross Mayfield, investment strategy analyst at Baird. The Nasdaq was down 2% on Wednesday afternoon, with Alphabet and other major hyperscalers mostly down between around 2%. SpaceX was down 3%.