From Chips to Turbines, the AI Trade Sells Off

NEW YORK, Oct. 22 — TheThe AI trade sold off on Thursday, from the makers of chips to the makers of power equipment. The PHLX Semiconductor index fell 6.72 percent, its worst day since June 23, and GE Vernova, which makes gas turbines, fell 10.64 percent.

Jensen Huang, Nvidia’s chief executive, told CNBC on Thursday that demand for the neoclouds, AI cloud companies such as CoreWeave and Nebius, was “off the charts,” but that “there’s a scarcity of capital.” The same day Nebius disclosed a $3.5 billion, 364-day bridge facility from Citibank whose interest margin rises every 90 days.

Among the stocks of the AI trade, some of the steepest losses came at companies that sell the build-out its equipment, computing and power, such as Lam Research, GE Vernova, CoreWeave and Vistra. Their sales rest on what their customers can spend, and in part on what those customers can borrow or raise. The documents since Wednesday turn on that money: Nebius’s facility; a passage in Meta’s new filing that names its rivals for capital; and, on Friday in Seoul, a memory maker’s decision to stop weighing a stock offering. Apple, utilities and Treasury bonds rose.

The Session

Meta fell 6.98 percent, to $648.85, on its first full session since it reported its quarter after Wednesday’s close.METANasdaq641.37▲31.22+5.1%Meta Platforms · Monday’s session Its quarter, as this paper reported on Thursday, showed spending that outran the cash its business brought in, and a plan for non-voting shares to raise capital; Reuters called it “its first cash outflow in more than a decade due to its AI-related expenditures.”

The Nasdaq Composite fell 2.60 percent, to 26,008.86, its steepest daily drop since early June, Reuters reported, and the S&P 500 fell 1.21 percent, to 7,663.43. The Dow Jones industrial average rose 0.02 percent, to 52,867.98, a gain Reuters said it “eked out” minutes before the closing bell. The chip index closed at 10,731.98, its lowest close since July 29 and 26.7 percent below its record close on June 22.The Chip IndexThe PHLX Semiconductor index, or SOX, fell 7.87 percent on June 23, the day after its record close of 14,634.72. Even after Thursday it was up 51.5 percent this year, Reuters reported.

The selling ran through the chip business. The chip-equipment makers Lam Research and KLA fell 11.76 percent and 9.55 percent; AMD fell 8.10 percent and Intel 8.04 percent. Nvidia, down 4.40 percent, and Broadcom, down 4.31 percent, held up better.

CoreWeave fell 10.06 percent, to $55.60, its lowest close since May 9, 2025, in the daily closes published by Yahoo Finance and Nasdaq, and Nebius fell 7.23 percent. GE Vernova fell 10.64 percent, to $827.42, and Vistra, which by its own account has 20-year contracts to supply Meta with power from three of its nuclear plants, fell 9.81 percent.

Reuters put the fall down to spending on AI. Meta’s report “reignited worries about the AI boom’s heavy capital spending, sending investors to the safety of US Treasuries,” it reported. “Investors are starting to realize that there are some holes in the AI story,” Paul Nolte, a market strategist at Murphy & Sylvest, said, as quoted by Reuters.

“They are rotating out of techs, out of the AIs, and into the more safety trades, whether it’s bonds or some of those big Dow Jones stocks,” Joe Saluzzi, co-head of equity trading at Themis Trading, said, as quoted by Reuters. The 10-year Treasury yield fell to 4.96 percent from 5.13 percent, by the Treasury Department’s daily figures; Reuters, which put the late yield at 4.953 percent, called it the biggest daily drop since March 10, 2023.The Ten-YearReuters measured a fall of 19.3 basis points. The yield had touched 5.3645 percent on Oct. 7, its highest since April 2002, Reuters reported. On the Treasury’s figures, its high for the year was 5.31 percent, on Oct. 5.

Utilities rose: Dominion Energy 4.93 percent, NextEra Energy 4.62 percent and Southern Company 3.79 percent. Apple rose 1.23 percent, to $348.22, a record close in Yahoo Finance’s data. Brent crude settled up 4 percent, at $113.17 a barrel, after Houthi attacks in Saudi Arabia, and investors worried that strife in the Middle East could keep inflation hot and force the Federal Reserve to keep raising interest rates, Reuters reported.

The Money

Mr. Huang spoke to CNBC’s Arjun Kharpal on the sidelines of Nvidia’s GTC conference in Berlin. “What is missing in the middle is the working capital to fuel that growth… because there’s just so much demand across so many sectors of AI, there’s a scarcity of capital,” he said. “The demand of the capital is much greater than the availability of the capital. That’s going to get solved.”

The demand of the capital is much greater than the availability of the capital.

Nebius’s facility shows what that capital costs. Signed on Oct. 17 and disclosed in a filing with the Securities and Exchange Commission on Thursday, it bears interest at Term SOFR, a benchmark rate, plus 2.75 percentage points, rising by a quarter-point for each 90 days to as much as 3.50 points. It matures on Oct. 16, 2027, and is secured on substantially all of the borrowers’ assets. The proceeds are for “data center development and GPU procurement, as well as for general corporate purposes,” Nebius said.The BridgeNebius may repay early “without premium or penalty” and must keep a minimum level of liquidity, the filing says. By this paper’s arithmetic, three quarter-point steps take the margin to its 3.50-point cap about nine months into the year-long loan.

“Sequencing our financing is how we optimize our long-term cost of capital,” Ophir Nave, Nebius’s chief operating officer, said in a statement. Nebius could still turn to “asset-backed financing based on investment-grade customer commitments of more than $40 billion of long-term contracts,” he said.

As this paper reported on Thursday, Meta’s information statement, filed on Wednesday, says its board’s special committee wanted to secure capital “before competitors saturate various funding options.” Meta’s information statement also names its rivals for money: “Recent significant capital raises at other notable companies, and others soon anticipated to take place, to fund the same AI growth—for example, Alphabet, SpaceX, Anthropic, and OpenAI—have resulted in an increasingly challenging environment for raising capital.” The committee judged it prudent for Meta to raise what it needs “before even more companies have absorbed available capital in the market.”

On Friday in Seoul, SK hynix said its American unit, Solidigm, “will halt its review of potential pre-IPO and IPO options,” which it had explored to finance a new factory in the United States. “While SK hynix and Solidigm continue to deliver solid business performance, financial market volatility has increased, contributing to a broader correction in semiconductor stocks,” the company said.SolidigmSolidigm was formed when SK hynix bought Intel’s NAND flash and solid-state drive business in 2021, Seoul Economic Daily notes. Its “existing production facilities have limited capacity to meet rising demand,” SK hynix says.

SK hynix shares closed up 4.42 percent. The Kospi, down as much as 4.12 percent in early trading, closed up 0.30 percent, at 5,550.30. Seoul Economic Daily, which reported the figures, said the decision had eased worries about duplicate listings; financial regulators had said that a listing of Solidigm abroad would fall under the rules on them, it reported. The decision, SK hynix said, “does not reflect any change in Solidigm’s growth prospects or investment needs.”

What Comes Next

For investors, Thursday sorted the AI trade by who pays for it. Neoclouds such as Nebius and CoreWeave pay for their build-outs partly with borrowed money, and on Thursday they fell with the companies that supply the build-out. Lenders may be the gainers: Nebius’s margin is set to rise every 90 days, and Blackstone rose 8.38 percent after it said, as Reuters put it, that widening credit spreads on AI-related debt could present an opportunity to lock in higher returns.

Microsoft and Alphabet report on Oct. 28 and Amazon on Oct. 29, and the Federal Reserve announces its rate decision on Oct. 28. On Thursday Microsoft fell 2.23 percent, Alphabet 3.15 percent and Amazon 4.57 percent. Financial markets were pricing in the probability of another quarter-point rise in the Fed’s rate before year-end, Reuters reported. SK hynix holds its quarterly call at 9 a.m. on Oct. 28 in Seoul, which is 8 p.m. on Oct. 27 in New York.