S&P 500 and Nasdaq Slide as Investors Reduce Tech Exposure

U.S. stocks moved lower on Friday as Wall Street headed toward a mostly losing week, with investors rotating away from technology and artificial intelligence-related companies.

The S&P 500 declined 1%, while the Nasdaq Composite fell 1.9%, reflecting continued pressure on growth-oriented stocks. The Dow Jones Industrial Average performed relatively better, losing 241 points, or 0.5%, as gains in parts of the energy sector helped limit its decline.

The broader market weakness followed a difficult period for technology shares, which have faced increasing scrutiny over valuations, financing requirements and the sustainability of spending on AI infrastructure.

The divergence between the major indexes highlighted a shift in market leadership. While technology-heavy benchmarks experienced substantial pressure, energy-related stocks benefited from rising oil prices and helped cushion losses in the Dow.

Semiconductor Stocks Face Their Worst Week Since July

Chipmakers remained under pressure as concerns about competition from China weighed on semiconductor shares. The VanEck Semiconductor ETF, which tracks major companies in the industry, fell 1% on Friday, led lower by Micron Technology, Advanced Micro Devices and SanDisk.

The ETF was down approximately 8% for the week, putting it on course for its largest weekly decline since July.

The weakness in semiconductor stocks has become a major factor behind the broader market downturn. As key suppliers of processors and memory used in AI infrastructure, chipmakers have benefited from substantial investment by cloud computing companies and other businesses expanding their computing capabilities.

However, concerns about Chinese competition have added uncertainty to the industry’s outlook. Investors are reassessing whether current growth expectations can be sustained as competitive pressures increase and the market becomes more sensitive to financing costs.

The semiconductor sell-off also contributed to the Nasdaq’s weekly decline of more than 4% and the S&P 500’s loss of nearly 2%.

AI Infrastructure Debt Raises Investor Concerns

Beyond competition and valuations, investors are increasingly focused on the amount of debt companies are taking on to finance AI infrastructure expansion.

Shares of neocloud provider CoreWeave fell approximately 10% on Friday, bringing its losses for the week to more than 23%. The company has seen its total debt rise above $51 billion, intensifying concerns about its balance sheet and exposure to financing costs.

The decline illustrates the risks facing companies that rely on substantial borrowing to expand computing capacity. Although demand for AI infrastructure has supported rapid investment, rising debt levels could become a challenge if interest expenses increase or spending growth slows.

Michael Rosen, chief investment officer at Angeles, said investors should continue monitoring increased debt issuance and watch for signs of excessive borrowing. He also indicated that the market was not yet remotely close to the levels of excessiveness that would constitute a systemic issue.

For investors, the distinction between company-specific financing risks and broader financial instability remains important. Elevated borrowing deserves attention, but the available comments do not establish that the current AI investment cycle represents a systemic threat.

Rising Oil Prices and Inflation Complicate the Market Outlook

Energy stocks provided some support to the market as crude oil prices climbed amid escalating tensions involving the United States, Iran, Russia and Ukraine.

West Texas Intermediate crude futures rose approximately 2% to above $100 per barrel, while Brent crude advanced around 3% to above $109. Higher energy prices have added to concerns about inflation, complicating the outlook for monetary policy and corporate financing.

Wholesale inflation recorded its largest increase since 2022, according to the source report, while consumer inflation remained above the Federal Reserve’s 2% target.

Persistent inflation can weigh on equities by increasing uncertainty over interest rates and reducing the likelihood of near-term monetary easing. Higher borrowing costs may be particularly challenging for growth-oriented companies whose valuations depend on future earnings and continued investment.

The combination of rising energy prices, inflation concerns and technology-sector weakness has therefore created a difficult environment for investors heading into the next Federal Reserve meeting.

Federal Reserve Rate Decision in Focus

Federal Reserve Chair Kevin Warsh spoke at an International Monetary Fund event in Bangkok but did not comment on whether the central bank would raise interest rates before the end of the year.

According to the report, traders interpreted the absence of a signal about further tightening as supporting expectations that the Fed would leave policy unchanged later in October.

The CME Group’s FedWatch tool indicated an 85% probability that the central bank would maintain its overnight interest rate at its October 27–28 meeting.

However, the outlook remains sensitive to incoming economic data, particularly inflation figures and energy prices. If inflation remains elevated, investors may need to adjust expectations for the timing of future rate cuts or the possibility of additional tightening.

What Investors Should Watch Next

Investors will be monitoring the Federal Reserve’s October meeting, upcoming inflation data and developments in the AI infrastructure sector. The central bank’s decision could influence bond yields, equity valuations and the relative performance of technology and cyclical stocks.

Within the semiconductor industry, the key issues include competitive pressure from China, the pace of AI spending and whether chipmakers can maintain growth expectations. Investors will also be watching debt-heavy AI infrastructure providers such as CoreWeave for signs that financing costs are affecting their ability to expand.

Meanwhile, crude oil prices remain an important variable because sustained increases could add further inflationary pressure and complicate the Fed’s policy outlook.

The market’s next direction will depend on whether inflation stabilizes, borrowing concerns remain contained and investors regain confidence in the earnings potential of AI-related businesses.