AI Buildout's Debt Burden Shakes Tech Markets

The Nasdaq Composite fell roughly 2.5% on Friday as investors confronted the debt and borrowing costs behind the artificial intelligence buildout. The index lost almost 5% for the week, its worst week since June, while the S&P 500 dropped 1.4% Friday and more than 2% for the week. The market’s machinery had celebrated AI; now it’s pricing the bill.

Debt Behind the Boom

CoreWeave, a neocloud company backed by Nvidia that rents computing power to AI businesses, carries tens of billions of dollars in debt to finance its growth. Its bond yields recently rose to levels that signal distress or a higher risk of default. CoreWeave went public in 2025. Its shares fell 14% Friday, lost one-quarter of their value during the week and stood more than 60% below a peak shortly after its March 2025 initial public offering.

"It's unclear that (CoreWeave is) going to get a sufficiently good return to pay down the debt that they borrowed," Gil Luria, head of technology research at D.A. Davidson, told CNN. He described neocloud companies as "the subprime tranche of the AI trade" as investors grew concerned about the buildout’s trajectory. Luria said demand for AI is real and growing, but runs up against concerns about unsustainable financing and steep interest rates.

The S&P 500 and Nasdaq had reached record highs 10 days earlier. Higher borrowing costs have since pressured debt-dependent parts of the AI boom, while a closely watched semiconductor-stock index fell 3.9% Friday for its eighth consecutive daily decline. The index stood down more than 20% from its June peak, though still up almost 60% year to date.

Who Sets the Price

Nvidia’s gross margin in the previous quarter was 75%; Micron, a memory-chip seller, reported a margin of nearly 87%. Micron lost money on memory chips three years ago. A New York Times DealBook item said shortages set prices and high margins typically attract competitors, but competition hadn't yet cut margins in the AI buildout. The signal had been visible since 2023.

The item said the largest technology companies would spend around $800 billion on AI infrastructure in 2026, while consensus forecasts put spending above $1 trillion in 2027. Goldman Sachs said that would represent a larger share of gross domestic product than any investment cycle since the railroads. Washington has made AI a national priority, and some spending is underway partly with tax credits, even as questions remain about the buildout’s cost and whether companies could do it for less.

AMD, custom silicon from Amazon and Chinese open-weight models could eventually lower costs, the DealBook item said, but that would take time. Meanwhile, investors weighed political disputes over data centers and the possibility that cheaper, efficient Chinese chips could weaken U.S. and South Korean companies’ market share and pricing power. Chinese memory-chip maker CXMT announced progress on advanced memory chips earlier in the week.

The Market’s Levers

South Korea’s benchmark Kospi, heavily weighted toward chipmakers SK Hynix and Samsung Electronics, fell 14.5% during the week, its worst weekly performance since 2008. Semiconductor companies accounted for roughly one-fifth of the S&P 500’s market value. The VIX, Wall Street’s fear gauge, rose 30% Friday to above 20 points, signaling elevated volatility.

The Federal Reserve’s chairman, Kevin Warsh, suggested he wouldn't push to raise borrowing rates that month, though persistent inflation could force the Fed’s hand. DealBook said the S&P 500 appeared set to open higher Friday largely because of Warsh; CNN’s report recorded a 1.4% decline during Friday’s trading. Thomas Martin, portfolio manager at Globalt Investments, put the market’s reflex plainly: "The market sells first, asks questions later." Nvidia CEO Jensen Huang told Bloomberg on Thursday that he was optimistic about CoreWeave, helping its shares rally that day. By Friday, that lift was gone.