AI Debt Puts Big Tech’s Market Power Under Strain

AI-linked stocks stumbled as investors questioned whether the companies financing the artificial-intelligence build-out can earn enough to support their spending. The retreat came as the bull market reached its fourth anniversary, ahead of quarterly results from Meta Platforms, Lam Research and Texas Instruments, among other major companies.

Debt and the Cost of Capital

CoreWeave, an AI cloud company with about $50 billion in debt, saw its shares tumble during the week. The concern reaches beyond one company: investors are weighing the debt used to finance data centers against uncertainty about how those facilities will generate revenue. Technology companies are borrowing heavily to build infrastructure, but the return on that investment remains an open question.

The Financial Times News Briefing transcript reported that CoreWeave wanted an investment-grade rating for its bonds. A senior executive said such a rating could help the company tap insurance-company capital. The transcript also said bankers acting on Anthropic’s behalf had lobbied for an investment-grade rating after the company goes public, a move that could expand its access to financing.

Anthropic received a double-B grade from Kroll Bond Rating Agency in June 2026, according to documents FT reporters saw. The rating hadn't previously been publicly reported. KBRA lacked full access to Anthropic’s financial information, used an in-house credit risk score the transcript described as rare for a credit rating, and received only a limited set of financials. KBRA and Anthropic declined to comment.

Michelle Chan, the FT’s US credit correspondent, said an investment-grade rating could lower borrowing costs, help lenders assess Anthropic’s creditworthiness and give it access to a larger pool of capital. She said Anthropic appeared close to investment grade under KBRA’s framework if it had a substantial cash cushion after an IPO. Chan also noted that KBRA isn't one of the three major credit rating agencies and that other agencies might not give Anthropic as much leeway.

The Earnings Test

Goldman Sachs estimated that Meta and four other AI hyperscalers together would increase capital spending to about $1.2 trillion next year. Investors want evidence that the spending can produce returns. “One of the most important takeaways of earnings season is whether or not the profitability of the hyperscalers can grow faster than the pace of their capex,” said Kevin Shea, senior equity analyst at BNY Wealth.

Meta, with a market capitalization of about $1.9 trillion, had seen its shares rise in recent weeks after launching its Muse AI assistant. “With the cost of capital going up, this capex blowout is going to become more expensive, which raises the bar for returns,” said Chuck Carlson, chief executive officer at Horizon Investment Services. “Meta is going to be the first up to try to provide some color around that question.”

S&P 500 companies were forecast to increase third-quarter earnings by more than 30%, according to LSEG IBES. Investors also prepared for results from Tesla, Netflix, Procter & Gamble and GE Aerospace. Lam Research and Texas Instruments were due to report on Wednesday; their share prices were each up about 60% in 2026.

A Jittery Market

Semiconductor companies and technology hardware firms, including Dell Technologies, recorded sharp declines. The Philadelphia SE Semiconductor index fell 8% that month but remained up more than 60% for the year, compared with a 13% year-to-date gain for the S&P 500. The pullback didn't erase the gains: the S&P 500 remained about 1% below its record high set that month, while sectors that had lagged technology began picking up the slack.

“The narrative in the market is a little bit jittery,” said Garrett Melson, portfolio strategist with Natixis Investment Managers Solutions. “Clearly there's a lot of uncertainty around where AI stands right now.” On October 9, Deutsche Bank strategists said the rotation into technology had “run far and the risk-reward no longer looks favorable in the near term.” Deutsche Bank and RBC Capital Markets separately cut their recommendations on the technology sector.

Katie Martin, the FT’s markets columnist and a host of the Unhedged podcast, said South Korea’s semiconductor-heavy stock market fell 8% in a session, with selling carrying into Europe and, to some extent, the United States. She described the AI trade as driven in large part by “hype and vibes,” and said it wasn't clear whether the pullback was a short-term wobble or the beginning of a more serious downturn.

Rising Treasury yields and the possibility of further Federal Reserve rate increases remained concerns for stock investors. Hot inflation data during the week increased bets on another rate increase at the Fed’s meeting at the end of October, though futures pricing indicated most investors expected the central bank to wait until its December meeting to raise rates for a second time that year.