Nasdaq Drops 2.5% as Chip Stocks Fall a Ninth Straight Day and AI Debt Fears Spread

U.S. stocks closed sharply lower on Friday, led by the Nasdaq Composite, as a semiconductor selloff stretched into a ninth straight session for the big chip funds, stress in the debt financing the artificial intelligence buildout spread from CoreWeave's bonds into software shares, and a week of hot inflation data kept a Federal Reserve rate hike in play for December.

The Nasdaq Composite fell 2.5% on Friday, the S&P 500 fell 1.4% and the Dow Jones Industrial Average fell 0.6%. The Dow had touched 52,582 after rising more than 1% in the morning, before the advance faded and then reversed. The Invesco QQQ fund, which tracks the Nasdaq-100, closed at $710.05, down 2.47% on the day.

For the week, the Nasdaq lost almost 5% and the S&P 500 lost more than 2%, the worst week for both indexes since June, and the Nasdaq's decline snapped a four-week winning streak. The Dow, despite Friday's drop, finished with a second straight weekly gain. The split is the week's story in miniature: investors were not fleeing stocks in general — they were fleeing the artificial intelligence trade and the borrowed money behind it, after September consumer and producer price reports both came in hotter than expected on Wednesday and Thursday.

Chip stocks fall for a ninth straight day, the longest skid since 2006

The iShares Semiconductor ETF (SOXX) closed at $496.91, down 3.46%, and SOXX and the VanEck Semiconductor ETF (SMH) each fell for a ninth consecutive session, the first such streak since May 18, 2006, according to Dow Jones Market Data. Through Thursday the Philadelphia Semiconductor Index had already fallen for eight straight sessions, its steepest eight-session percentage decline since the 'Liberation Day' selloff in April 2025, and Friday extended the slide.

The closing losses across the sector were broad. Micron Technology fell 5.0%, Advanced Micro Devices fell 5.3%, Intel fell 5.7% and Broadcom fell 4.2%, while Nvidia, the sector's largest name, limited its decline to 1.1%. Memory-chip makers have been under particular pressure this week after reports of progress by China's ChangXin Memory Technologies on a next-generation DRAM design raised the prospect of tougher competition. TickerGrove examined the sector's slide into bear-market territory in separate coverage published Friday.

Software, which had largely resisted the week's selling, joined it on Friday: the iShares Expanded Tech-Software Sector ETF (IGV) fell 4.9%, Microsoft fell 2.5% and Salesforce fell 2.2%. The analyst color ran cautious rather than panicked. Dennis DeBusschere of 22V Research wrote that comparisons between artificial intelligence and the dot-com bubble have grown louder this week, and Warren Pies of 3Fourteen Research wrote that bears are questioning whether data-center construction will move fast enough to house the graphics processors that Wall Street's semiconductor revenue estimates assume.

CoreWeave's borrowing costs made the AI trade a credit story

CoreWeave, the Nvidia-backed data-center operator at the center of the week's anxiety, closed at $60.53, down 13.1% on Friday and 25.8% for the week. The company carries about $50 billion of debt, and the cost of insuring its debt against default climbed to about 1,200 basis points this week, while yields on its bonds due 2031 moved through 15% and, on Thursday, past 16%, levels that signal distress. Tom Plumb of the Plumb Balanced Fund said cracks were appearing in the financing of data centers, because lenders cannot yet be sure who the winners will be.

The concern reaches beyond one borrower. Lenders are still willing to finance artificial intelligence data centers, but they are demanding more compensation for projects further from completion, and private credit has been expected to finance a large share of the buildout — roughly $1 trillion of it, by one Carlyle estimate. CoreWeave's leadership has told employees that markets can misunderstand the company and that its contract backlog supports its obligations. Whether that defense holds is a company story; on Friday it was also the market's story, because the same repricing of AI credit is what pulled the chip and software names down with it.

Warsh offered no hint, and the hike bets moved to December

The 10-year Treasury yield ended Friday near 5.10%, well below the 5.33% it touched after Wednesday's consumer price report but high enough to keep pressure on borrowing costs across the AI complex. Federal Reserve Chair Kevin Warsh, speaking overnight at an International Monetary Fund meeting in Bangkok, declined to signal whether the Fed would hold or raise rates at its late-October or December meetings. 'It's a new chapter at the Fed, and we're not in that business anymore,' Warsh said.

After his remarks, traders put a 17% probability on a rate hike at the Fed's late-October meeting, down from 28% a day earlier, and an 89% probability on a hike in December, according to CME FedWatch. The Federal Open Market Committee meets on October 27 and 28, and the Fed's pre-meeting blackout period begins on Saturday.

Most stocks held up — the indexes fell because their biggest names did

Underneath the headline indexes, Friday was not a broad liquidation. Roughly 390 S&P 500 stocks were rising early in the session, advancers still led decliners at midday, and energy, utilities, consumer staples and materials shares rose, with oil and gas industry groups gaining 2% or more. Bank stocks, coming off a strong week of earnings, cushioned the Dow during the session. The indexes fell because their largest weights fell: the selling was concentrated in the mega-cap technology and semiconductor names that dominate the benchmarks' value.

The week in review, and the earnings that now decide the argument

The week's damage was done in layers: a hotter-than-expected September consumer price index on Wednesday, a producer price index up 1.3% for the month and 6.3% for the year on Thursday, and a rolling repricing of the debt behind the AI buildout, partly offset by bank earnings that mostly beat expectations. Friday's own data — September industrial production up 0.7% and import prices up 1.1%, both covered separately by this desk — did not change the market's mind.

What can change it arrives next week. Netflix reports on Tuesday after the close, Tesla, Lam Research and Texas Instruments report on Wednesday, and Meta Platforms follows on Thursday with the first detailed word from a hyperscaler on whether its capital spending plans still justify the buildout's cost. The chip index is down about 8% in October but still up more than 60% this year, against a 13% gain for the S&P 500 — which is why the argument matters: this week's sellers were trimming the year's biggest winners, not abandoning a broken market.