Key facts
- AI financing concerns fueled a tech sell-off in Asia.
- US producer prices posted the largest gain in 4-1/2 years.
- US Treasuries rallied, with 10-year yields falling 10 bps.
- Chip stocks fell for a seventh consecutive day.
- The Nasdaq Composite edged higher, while the Dow reached a one-month high.
The global technology sector experienced a significant sell-off, particularly in Asia, on Thursday, driven by concerns over the financing of the AI boom. South Korea's KOSPI index lost 20% in a week, and Japan's Nikkei slid 5% on Thursday. Concerns over AI financing led to a sharp drop in CoreWeave's bonds and a record high in the cost of insuring against AI firm defaults.
Despite the tech sell-off, US markets showed resilience. The Nasdaq Composite edged up 0.1%, the S&P 500 gained 0.3%, and the Dow Jones Industrial Average rose 1% to a one-month high. US producer prices saw their largest increase in 4-1/2 years, yet US Treasuries rallied, with the 10-year yield falling 10 basis points to 5.08%, indicating a flight to safety.
Analysts noted that while the situation is not yet a crisis, vigilance is required as debt increasingly finances AI capex. The average tech rotation out of a sector since mid-2024 has lasted 67 days, with a median drawdown of 14.6%.