Hotter US Inflation, AI Debt Fears Push Nasdaq Down 1.88%

Higher-than-expected US inflation and mounting concerns over debt at artificial intelligence companies weighed on New York stocks. As investors grew more wary of another interest-rate increase, questions over the sustainability of rising AI investment fueled a broad selloff in technology shares.

On October 14, the Nasdaq Composite closed at 26,692.87, down 511.51 points, or 1.88%, from the previous session. The S&P 500 fell 86.51 points, or 1.11%, to 7,718.94. The Dow Jones Industrial Average ended at 51,621.48, down 48.62 points, or 0.09%, posting a relatively smaller decline.

The main pressure on markets came from the September consumer price index released that day. The US Labor Department said headline CPI rose 3.7% from a year earlier, up from 3.4% in August. That topped the market forecast of 3.6%. Core CPI, which excludes food and energy, also beat expectations, rising 2.6% from a year earlier and 0.3% from the prior month.

Interest-rate futures reacted immediately. The probability of an October rate increase jumped to 51.5% after the inflation report from 22.1% a day earlier. It later slipped back into the 30% range in afternoon trading, but the move still underscored the risk of further tightening for investors who had been expecting inflation to cool.

AI-related shares were hit by a separate concern. Cloud company CoreWeave plunged 15.46%. The drop reflected worries that its borrowing burden was becoming excessive as it rapidly expanded its data center footprint.

The yield on bonds CoreWeave issued to fund those data center investments approached 15%. Investor anxiety deepened after Tesla Chief Executive Officer Elon Musk also voiced concern. CoreWeave's CEO, by contrast, called the market reaction "irrational" and expressed confidence in the business model.

The selloff spread to semiconductor stocks. The Philadelphia Semiconductor Index dropped 4.3%. SanDisk fell 5.97%, while SK Hynix ADRs lost 4.02% and Micron Technology slid 3.88%. Intel and AMD also fell 3.20% and 2.28%, respectively.

The bond market reversed course during the session. Treasury yields, which had surged after the inflation data, gave back those gains as investors bought safe-haven assets amid the stock-market decline and awaited follow-up inflation data. As of 3 p.m., the yield on the US 10-year Treasury stood at 5.189%, down 0.027 percentage point from the previous session.

The dollar remained firm. The dollar index, which measures the greenback against six major currencies, reached 102.94 at one point, its highest level in 18 months. It later pared gains and finished at 102.53.