$2 Trillion Wiped From US Chipmakers as Rising Yields Test AI’s Debt-Fuelled Build-Out

CoreWeave shares ended last week down 23.5%, while the PHLX Semiconductor Index fell 11.4%, according to Wolf Street, after hotter-than-expected US inflation reignited concern over the debt financing artificial intelligence infrastructure. US chipmakers have shed nearly $2 trillion in market value since the previous week, and AI fundraising has slowed, Reuters reported.

“Global equity markets are closing a bruising week on a steadier footing, but the widening gap between regions is becoming increasingly striking,” said Daniela Hathorn, senior market analyst at Capital.com.

The pan-European STOXX 600 gained more than 2% over the week, its best performance since late June, according to Reuters, and Bloomberg reported that Europe was on course for its biggest weekly outperformance of the S&P 500 since March as investors rotated away from the AI trade. The S&P 500, by contrast, posted its worst week since June, the Associated Press reported.

Hot inflation pushed borrowing costs higher

US annual inflation accelerated to 3.7% in September from 3.4%, as energy costs surged, CNN and CBS News reported. Consumer prices rose 0.6% month on month, the largest gain since April, while core inflation rose to 2.6% from 2.4%. Within moments of the release, the 10-year Treasury yield spiked from 5.19% to 5.33%, according to Wolf Street.

The 10-year yield serves as the benchmark for mortgages and other loans, Yahoo Finance noted, and the Associated Press reported that the climb has raised borrowing costs for the US government, companies and households alike. The repricing that hit data centre operators reaches homebuyers and small businesses through the same channel.

“The Nasdaq has proved especially vulnerable as investors question whether future AI returns can justify stretched valuations and increasingly costly financing,” Hathorn said.

The 10-year yield ended the week at 5.07%, down 30 basis points from its recent high, according to FXStreet, as the tech sell-off drove investors towards the safety of Treasuries. “It would weaken the USD and reduce US yields across the curve,” said Thierry Wizman, global FX and rates strategist at Macquarie Group, describing the effect a slowdown in AI spending would have.

CoreWeave became the market’s stress test

“CoreWeave emerged as the flashpoint after yields on some of its debt moved into distressed territory, prompting a broader reassessment of highly leveraged AI infrastructure companies,” Hathorn said.

The yield on CoreWeave’s 9.75% bond due in 2031 reached 15.78%, CNBC reported, and the company has taken on more than $51 billion of debt and obligations to finance its build-out. Its five-year credit default swaps hit a record 1,194.5 basis points on Thursday, according to ICE Data Services, pricing a better than 60% chance of default within five years. S&P Global rates the company B+, which sits in junk territory.

CoreWeave has contested the market’s reading. Chief executive Mike Intrator pushed back in an internal memo obtained by CNBC, blaming the market for acting “irrationally”.

“A rates event in credit clothing” was how Parth Talsania, chief executive of Equisights Research, described the sell-off in comments to Reuters, linking it to the hot inflation print. The pressure is spreading down the credit ladder. Bloomberg reported that junk bond buyers are increasingly freezing out tech startups seeking financing, even as Alphabet, Amazon, Meta and Oracle issued more than $228 billion of bonds this year as of October 13, according to LSEG.

Europe’s thin AI exposure became a buffer

“Europe, by contrast, has emerged as the week’s notable outperformer, benefiting from what was once seen as one of its greatest weaknesses: limited exposure to the AI trade,” Hathorn said.

European indices carry heavier weightings in healthcare, financials, industrials and other value and defensive sectors, leaving them less exposed to the repricing of long-duration technology stocks. “More modest valuations have provided an additional buffer against rising global yields,” she added. Strong corporate earnings also helped cushion the region from the global tech sell-off, according to Reuters.

The region carries its own pressures. The European Central Bank has raised rates by 50 basis points in 2026 to 2.50% to contain price pressures from higher oil prices, Reuters reported, and French bond yields jumped on Monday over budget worries, rising well above German yields, according to the Associated Press. Healthcare shares were also among the region’s biggest laggards on Friday, Bloomberg reported.

“Europe’s structural challenges, from weak growth and fiscal pressures to political uncertainty, have not disappeared, but this week has offered a powerful reminder of the value of diversification when the concentrated US technology trade comes under strain,” Hathorn said. For savers whose pensions and index funds lean on a narrow group of US technology companies, that concentration works in both directions.

Huang’s reassurance bought time

“CoreWeave’s strength is improving every day,” Nvidia chief executive Jensen Huang told Bloomberg at an event in Stockholm, adding that the company does not need a financial backstop from Nvidia, which owns about 10% of CoreWeave. CoreWeave rebounded from its intraday lows to close up about 5.9% that day, according to TradingKey, and Asian technology stocks recovered on Friday.

Nvidia signed a $6.3 billion agreement with CoreWeave in September 2025, committing to buy unsold compute capacity through April 2032, and Barclays analysts described that agreement as a useful backstop ensuring capacity utilisation. Credit markets remained cautious even after Huang spoke, with CoreWeave’s default swaps reaching their record on the same day.

“The comments helped defuse immediate fears, but they did not settle the larger question now confronting markets: how sustainable is an AI infrastructure boom built on vast amounts of debt when the risk-free rate is above 5%?” Hathorn said.

Big Tech earnings decide what comes next

“Huang may have eased the sense of crisis, but the next test will come from Big Tech earnings,” Hathorn said. “Companies must now prove that record AI investment can generate the revenue and cash flow needed to justify both its scale and its cost.”

“The market wants evidence that AI spending is returning value,” said Aaron Hill, chief market analyst at FP Markets. AI stocks rebounded at the start of this week, the Associated Press reported, recovering part of their earlier losses.

The results season will show whether AI revenue is growing fast enough to service the debt raised to produce it. It will also indicate whether Europe’s lead marks a lasting rotation towards value and defensive sectors, or a pause in a technology trade that still commands investor conviction.