AI has a problem it can’t solve; It’s own debt

Picture Credit: by Embedded AI

Technology stocks suffered a turbulent week as concerns over rising interest rates, mounting artificial intelligence-related debt and weakening semiconductor stocks triggered a broad market sell-off.

The Nasdaq Composite declined 2.14% on Friday, bringing its weekly losses to approximately 4.5%, its worst performance since June. Meanwhile, the S&P 500 fell 1.09%, ending the week nearly 2% lower.

The downturn comes just days after both indices reached record highs, highlighting growing investor uncertainty over the sustainability of the AI investment boom.

At the centre of these concerns is CoreWeave, an Nvidia-backed cloud computing company that provides infrastructure for AI development. The company has accumulated tens of billions of dollars in debt to finance its rapid expansion, raising questions about its ability to generate sufficient returns.

CoreWeave shares plunged nearly 12% on Friday and lost approximately 25% of their value during the week.

Semiconductor manufacturers also experienced significant losses. A closely watched semiconductor index declined 11.4% over the week, its worst performance since April 2025.

Investor concerns intensified following reports of technological progress by Chinese memory chipmaker CXMT, raising questions about future competition and pricing power among established American and South Korean manufacturers.

South Korea's Kospi index, heavily influenced by semiconductor giants Samsung Electronics and SK Hynix, plunged 14.5% during the week, marking its steepest weekly decline since 2008.

Picture Credit: by University of Central Florida

Meanwhile, rising oil prices added further pressure. Brent crude reached $110 per barrel, increasing concerns that persistent inflation could prompt additional interest rate hikes by the US Federal Reserve.

Wall Street's volatility index, the VIX, surged more than 20% on Friday, reflecting heightened market anxiety.

Despite strong underlying demand for AI technology, investors are increasingly questioning whether the industry's enormous infrastructure investments and debt-fuelled expansion can deliver sustainable returns.

The sell-off underscores growing concerns that the AI boom's financial risks could extend beyond technology companies and affect broader global equity markets.