Technology and artificial intelligence (AI) stocks experienced notable declines on Friday, marking their worst weekly performance since mid-summer amid growing investor concerns about the sustainability of debt-fueled investments in data center infrastructure. The Nasdaq Composite fell 2.2%, while the S&P 500 dropped 1.1% on the day, with the Nasdaq enduring its steepest weekly fall since June. Semiconductor-focused equities fared worse, with the VanEck Semiconductor ETF sliding 3.4% on Friday and falling more than 10% for the week.
Prominent chipmakers SanDisk, AMD, and Micron each recorded significant losses, declining 6.7%, 5.9%, and 5.7%, respectively. Cloud computing provider CoreWeave, which specializes in AI infrastructure, saw its shares plummet 13.5% on Friday and 25% over the last five trading days. The company’s business model, which involves purchasing costly computing capacity to rent to clients, has heightened sensitivity to any reversal in AI market momentum.
Market analysts attribute the selloff to growing doubts about the realistic valuations of AI and technology companies, coupled with intensifying competition from Chinese firms. Nic Puckrin, a cross-asset analyst and founder of Coin Bureau, described the situation as a "full-blown crisis of confidence," noting that the lofty valuations of firms heavily invested in infrastructure buildouts may be unsustainable. Highlighting concerns over inflated market expectations, he pointed to the semiconductor sector's declines and the scrutiny surrounding AI startup Anthropic’s projected $2 trillion valuation.
Research released this week by Gartner underscored the widening gap between current expenditures on AI computing infrastructure and anticipated long-term revenue. The firm estimates that AI service providers will invest approximately $7 trillion in infrastructure by 2030 but will generate no more than $3.6 trillion in related revenue during this period. Gartner further predicted that over 80% of emerging "neocloud" companies, such as CoreWeave, may cease operations within the next decade due to these financial pressures.
Despite these concerns, demand for AI chips and memory components remains strong enough to contribute to ongoing supply shortages, driving prices higher. Anthropic reported third-quarter revenue of $16.8 billion—a 45% increase quarter-over-quarter—highlighting continued growth even amid volatility. However, market participants remain cautious, worried that an oversupply of AI products in the United States could emerge if the heavy debt burdens incurred to develop computing infrastructure fail to deliver commensurate returns.