AI stock selloff eases as investors buy on dips amid falling bond yields

ETMarkets.com

Concerns surrounding AI infra companies partly reflected perceptions that growth had slowed at Anthropic and OpenAI, two major AI laboratories at the centre of the boom.

Data-centre operator CoreWeave remained in focus. Its shares fell 2% by midday after tumbling as much as 10% earlier in the session and plunging 15% on Wednesday. The company’s bonds traded at yields as high as 16%, while its credit-default swap spreads widened, underscoring concerns about rising financing costs. Wednesday’s hotter-than-expected US inflation report highlighted the risks that elevated borrowing costs posed to the capital-intensive AI sector.

Selling remained concentrated among heavily indebted companies and stocks that had recorded substantial gains earlier this year. AI infrastructure provider Nebius fell 5%, AI server maker Dell Technologies dropped 7%, and memory-chip company SanDisk lost 2%. Despite the declines, Nebius had gained 112% in 2026, Dell had surged 273%, and SanDisk had climbed 476%, according to LSEG data.

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Some investors said an infrastructure expansion billed as the largest ever was inevitably likely to face setbacks. They expected further volatility as interest rates rose and expectations of additional Federal Reserve tightening increased.

“While increased competition within AI, rising financing requirements and higher rates may periodically add to volatility, we view this latest bout as more of a recalibration of expectations than a fundamental break in the AI investment story,” said Ulrike Hoffmann-Burchardi, chief investment officer for the Americas and global head of equities at the UBS Chief Investment Office.

AI slowdown concerns

Concerns surrounding CoreWeave and similarly positioned companies partly reflected perceptions that growth had slowed at Anthropic and OpenAI, two major AI laboratories at the centre of the boom.

According to an investor who attended a meeting with Anthropic’s leadership in San Francisco on Wednesday, the company’s third-quarter revenue had risen 45% sequentially to $16.8 billion. Some analysts considered that figure disappointing given the sector’s lofty expectations and Anthropic’s reported pursuit of a $2 trillion valuation.

“We’re getting a whole lot of information suggesting that the largest AI companies may not be generating the earnings or revenue people anticipated, and I think that makes everyone nervous about companies like CoreWeave,” Kim Forrest, chief investment officer at Bokeh Capital Partners, told Reuters.

CoreWeave CEO Mike Intrator said in an internal memo that the market was acting “irrationally” and that he remained confident in the AI cloud company, Bloomberg reported on Wednesday.

Investors nevertheless remained broadly optimistic about the sector because its largest companies, including chip designer Nvidia and hyperscalers Alphabet, Microsoft, Meta and Amazon, were highly profitable and widely viewed as well-managed despite debt-related concerns.

However, higher interest rates were expected to increase borrowing and construction costs, with unprofitable and less-profitable companies likely to face the greatest pressure. US Treasury yields extended their recent decline on Thursday, with the 10-year yield briefly approaching 5% before moving higher again. Even so, elevated inflation had altered investors’ expectations for interest rates.

“I do think long rates above 5% and creeping towards 6% is a problem for the marginal borrower, I’ll call them,” said Ross Mayfield, investment strategy analyst at Baird. “It gets a lot harder for the tiers below the kind of big four hyperscalers.”

The Nasdaq was down 0.4% on Thursday afternoon, while Alphabet and most other hyperscalers were little changed. SpaceX, another major AI company, fell 3%.

“This select group of companies is driving most of the growth in the economy and the stock market, and they’re investing so, so aggressively and investors just aren’t really willing to pay for it or fully buy in to the extent that we saw in the late ’90s or whatever when investors kind of lost their minds,” said Jed Ellerbroek, portfolio manager at Argent Capital Management. “Investors have definitely not lost their minds. They’re being very cautious, and I think selective.”