AI Stocks Bounce; Lenders and Asia Don’t Follow

NEW YORK, Oct. 19 — Artificial-intelligenceArtificial-intelligence stocks bounced back on Monday, and the index of chip stocks rose for the first time in nine sessions. The Philadelphia Semiconductor Index closed up 1.61 percent, ending its longest losing streak since October 2008. Amazon gained nearly 5 percent, and the Nasdaq Composite 1.1 percent.

The lenders did not come back with them. CoreWeave, the AI cloud company at the center of the selloff, closed lower, and its bonds still yielded close to 15 percent. The cost of insuring Oracle’s debt against default rose further. And on Tuesday, Asia sold the chipmakers again: Seoul’s Kospi fell 3.73 percent.

The split matters because much of the spending on AI chips and data centers has come from borrowed money, as the Associated Press noted, and the 10-year Treasury yield closed Monday at 5.14 percent, up from 5.09 percent late Friday. “They need the debt markets in order to grow, in some form or fashion,” John Lloyd of Janus Henderson, whose fund owns CoreWeave bonds, said of the company, as quoted by CNBC.

The semiconductor index closed at 11,316.34, up 179.05 points. The S&P 500 rose 0.41 percent, to 7,690.73, and the Nasdaq 1.11 percent, to 26,430.89, while the Dow slipped 0.07 percent, to 51,966.03.Off the PeakThe index lost 15.7 percent in its eight losing sessions, from Oct. 7 through Oct. 16. Monday’s close left it 22.7 percent below its record close, 14,634.72, on June 22.

Nvidia, the largest company on Wall Street by market value, rose 1.38 percent, to $217.09.NVDANasdaq204.64▼9.02−4.2%Nvidia · Friday’s session AMD rose 1.76 percent and Micron 2.97 percent. Intel gained 2.43 percent after JPMorgan raised its rating to neutral from underweight.

Amazon rose 4.98 percent, to $262.45, after Morgan Stanley named it a top pick and raised its price target to $350 from $335. The bank expects Amazon Web Services, Amazon’s cloud business, to grow 47 percent in 2027, CNBC reported.AMZNNasdaq240.35▼3.44−1.4%Amazon · Friday’s session

CoreWeave could not hold its gains. Before the open, Goldman Sachs upgraded it to buy from neutral, though it cut its price target to $106 from $139. “Not all neoclouds are created equal,” Gabriela Borges, Goldman’s analyst, wrote in a note to clients quoted by CNBC, placing CoreWeave “toward the top of the quality rankings in the ecosystem.” The shares opened 7.2 percent higher, touched a 52-week low of $59.25 and closed at $61.12, down 0.44 percent, after losing 25.2 percent last week.

The Lenders

CoreWeave’s 9.625 percent bonds due 2032 yielded 14.9 percent on Monday, a little below last week’s high of more than 15 percent, and the spread on its five-year credit-default swaps stood at about 1,082 basis points, nearly 2 percent lower than on Friday, CNBC reported.Priced for DistressA credit-default swap is a contract in which the buyer pays for protection in case a borrower can’t repay its debt. A spread above 1,000 basis points, or 10 percentage points, is generally a sign of distress, CNBC notes. CoreWeave has taken on more than $51 billion of debt to pay for AI infrastructure. Goldman, which notes that its main funding is “asset-backed project financings rather than traditional corporate debt,” still expects its blended cost of debt to rise by 100 to 200 basis points.

The spread on Oracle’s five-year default swaps, by contrast, widened on Monday to 315 basis points, 311 percent higher than a year earlier, CNBC reported. S&P has rated Oracle BBB−, the lowest investment-grade rating, since a downgrade in July.One NotchS&P said in July that another downgrade could follow if it expected Oracle to sustain leverage above four times, saw no path to positive free operating cash flow by fiscal 2029, or took a negative view of Oracle’s AI strategy or the industry’s. By FactSet’s figures Oracle has issued $118 billion of long-term debt, and CNBC reported analysts’ consensus forecast of free cash flow of minus $23.7 billion this year. Its shares rose 1.06 percent Monday, to $129.59.ORCLNYSE130.67▼8.89−6.4%Oracle · Friday’s session

Oracle, Alphabet, Amazon and Meta have issued more than $228 billion of bonds this year, CNBC reported, citing the economist David Rosenberg. Oracle, he said in remarks quoted by CNBC, “is the bridge between junk-rated neoclouds and investment-grade hyperscalers.” “A downgrade to junk would be the clearest sign of contagion,” said Mr. Rosenberg, the founder of Rosenberg Research, who has a reputation for bearish calls.

Jim Reid of Deutsche Bank wrote in a report quoted by CNBC that such a cut “would risk pressuring IG-only investors into forced sales”: funds permitted to hold only investment-grade debt. Oracle, asked by CNBC for comment, said, “We have been very clear that maintaining an investment grade rating is our first priority as a company.” It added: “The AI infrastructure business has strong economic returns and we expect it will produce strong free cash flows once projects are ramped.” Brad Collins, a fixed-income portfolio manager at Vanguard, expressed confidence in Oracle and the other hyperscalers, CNBC reported: “Balance sheets are in a healthy starting spot.”

A downgrade to junk would be the clearest sign of contagion.

The AI cloud companies and firms with significant exposure to frontier labs are at the epicenter of the debate over funding costs, while AI-adjacent energy and utility borrowers have been more resilient, Amanda Lynam, Goldman’s chief credit strategist, wrote in a note quoted by CNBC. “As the pace of issuance has increased, differentiation factors around construction risk, coverage of principal or refinancing risk, and claim to tenant have become increasingly important,” she wrote.

The Demand

“At the moment, we have more compute capacity than we have demand, and we have a lot of the tokens and processing power being given away in freemium solutions,” John Lovelock, Gartner’s chief forecaster, told CNBC on Monday. A Gartner report last week found that “AI revenue will be insufficient to support profitable returns on all planned AI capital expenditures” from 2027 to 2030, CNBC reported. Mr. Lovelock said the computing power neoclouds are building to serve the leading frontier-model makers, which CNBC named as Anthropic and OpenAI, needs cash flow that is not yet scaling in proportion to the investment.

Rental prices for AI chips rose all the same. On the Ornn Compute Price Index, which settled on Monday, an hour on an Nvidia H200 cost $6.35, up 21.2 percent in seven days; a B200 cost $8.41, up 14.7 percent, and an H100 SXM $2.98, up 2.1 percent.The Rental IndexOrnn’s index is a volume-weighted average of the prices actually paid to rent graphics processors. It settles once each trading day, at 4 p.m. Eastern, and is listed on Bloomberg.

On Tuesday ABB, the Swiss electrification and automation company, reported record third-quarter orders of $12.06 billion, up 40 percent, and said its data-center order growth was “exceptional and growing at a triple-digit pace.” Its orders in the United States rose 82 percent. “ABB without data centers, it is a double-digit growth when you look at the order intake,” Morten Wierod, its chief executive, told CNBC. Its shares fell about 6 percent in early European trading on Tuesday, CNBC reported.

Asia

Seoul’s Kospi fell 3.73 percent on Tuesday, to 5,552.74, as SK hynix lost 4.23 percent and Samsung Electronics 2.98 percent, Yonhap reported. “Concerns over credit risks and profitability surrounding AI investment have yet to be fully resolved, limiting the sustainability of the rebound,” said Lee Kyoung-min, an analyst at Daishin Securities.

In Tokyo, SoftBank Group fell 6.01 percent, TradingKey reported, and the Nikkei 225 lost 1.3 percent. The Taiex fell 1.13 percent in Taipei, ahead of Wednesday’s settlement of October futures contracts, in which, dealers said, foreign institutions hold a large chunk of short positions. Foreign institutions sold a net NT$79.54 billion of Taiwan shares on Tuesday, after NT$76.74 billion on Monday, bringing their net sales this month to NT$662.07 billion, about US$20.3 billion, the Central News Agency reported, citing the Taiwan Stock Exchange.

U.S. futures were mixed early Tuesday: in CNBC’s 4:52 a.m. Eastern update, Nasdaq-100 futures were down 0.31 percent, and CoreWeave and Nebius were both down about 3 percent before the open.

The next evidence comes after Tuesday’s close, when SpaceX, which controls xAI, reports its quarter; Meta and Tesla report on Wednesday. For the lenders, the figure to watch is Oracle’s rating, one notch above junk.