Chip Selloff Spurs Flight to Bonds on AI Worries: Markets Wrap
(Bloomberg) — Another selloff in chipmakers weighed on stocks on concerns over whether massive artificial-intelligence investments will justify lofty valuations, pushing investors toward the safety of bonds.
Tech volatility rattled Wall Street as economic data did little to alter bets the Federal Reserve will keep rates elevated. US producer prices rose the most since 2022 while retail sales topped forecasts. Anthropic PBC’s results were solid, but signs that revenue growth slowed from earlier in the year deepened questions over the AI trade. CoreWeave Inc.’s credit risk hit an all-time high. The Nasdaq 100 fell 1%.
In a sign of rotation, most S&P 500 firms rose. Worries about the durability of the AI investment cycle are intensifying a debate about whether bonds are offering value after a rout that had propelled yields to multi-year highs. Thursday’s rally in Treasuries sent 10-year yields down 13 basis points to 5.06%.
“The selloff in tech sector equities continues to drive safe-haven flows into the Treasury market and pressure yields lower,” said Vail Hartman at BMO Capital Markets.
Given the extraordinary amounts of debt being taken on to build out AI infrastructure, higher borrowing costs are far from ideal, noted David Morrison at Trade Nation. The concern is that these will cut into future returns, even as the likely timing and size of these returns are far from clear, he added.
“Two questions matter. Is demand for AI real? Yes,” said Manish Singh at Crossbridge Capital. “Are we going back to working and using software as we did before AI? No. The structural opportunity is real, but that does not mean every company building the infrastructure will generate attractive returns for investors.”
Ultimately, the AI revolution will be judged not just by how much computing power we build, but by how profitably we use it, Singh noted. Future cash flows must justify today’s enormous capital commitments, and someone must finance the gap in the meantime, he said.
“AI may be the future. Debt servicing is still the present,” Singh concluded.
A closely watched gauge of semiconductor powerhouses dropped for a seventh straight day as concerns mount over higher interest rates, stretched valuations and the massive cost of building AI infrastructure.
The rising rate environment is a new challenge for markets to face in the second half of the year, while the Iran war was the main challenge in the first half of the year, according to Chris Zaccarelli at Northlight Asset Management.
“If this market is one thing it is resilient, and we believe that resilience will last through the end of the year, but we need to get through the uncertainty of the rapidly approaching mid-term elections, and the volatility that this creates, before the market can finish the year stronger,” he said.
Corporate Highlights:
Tesla Inc. planned to unveil its long-promised new Roadster sports car Thursday, reviving and refreshing a model it stopped producing more than a decade ago. The vehicle will give the company another offering in a slimmed-down lineup revolving primarily around a pair of mid-priced consumer models. Super Micro Computer Inc. has appointed Mark Long as chief financial officer, saying it aims to grow more quickly in the artificial intelligence era. Charles Schwab Corp.’s earnings beat estimates as retail investors continue to pile into the stock market, though the firm’s bank deposits and net interest margin fell short of expectations. PNC Financial Services Group Inc. reported third-quarter revenue that missed analysts’ estimates while the bank did a better job of keeping expenses in check than expected. Bank of New York Mellon Corp. posted profit that beat estimates as the firm got a boost from higher rates. Penske Automotive Group Inc., one of the largest car dealership groups in the US, reached a deal with its two biggest shareholders to go private at a $16.3 billion enterprise value. Some of the main moves in markets:
Stocks
The S&P 500 fell 0.1% as of 10:53 a.m. New York time The Nasdaq 100 fell 1% The Dow Jones Industrial Average rose 0.7% The Stoxx Europe 600 rose 0.2% The MSCI World Index was little changed Currencies
The Bloomberg Dollar Spot Index fell 0.3% The euro rose 0.5% to $1.1210 The British pound rose 0.5% to $1.3259 The Japanese yen rose 0.2% to 157.99 per dollar Cryptocurrencies
Bitcoin fell 0.2% to $81,569.29 Ether fell 1.3% to $2,383.23 Bonds
The yield on 10-year Treasuries declined 13 basis points to 5.06% Germany’s 10-year yield declined eight basis points to 3.38% Britain’s 10-year yield declined nine basis points to 5.33% Commodities
West Texas Intermediate crude rose 1.8% to $96.82 a barrel Spot gold rose 1.3% to $4,156.93 an ounce ©2026 Bloomberg L.P.
