The Nasdaq had its worst week since June after a hot inflation report raised doubts about debt-funded AI spending.

Wall Street's technology rally ran into a wall this week. The Nasdaq composite fell 2.1% on Friday to 26,140.03 and lost roughly 4.5% on the week, its worst since June, only about ten days after it set a record. The S&P 500 dropped 1.1% to 7,659.44, finishing about 2% lower for the week and wiping out the prior week's gains. Chipmakers led the declines.

Who got hit

Almost the whole tech sector fell: all but seven of the 75 technology stocks in the S&P 500 closed lower. Micron dropped 5.6%, AMD 6%, Broadcom 4.5% and Intel 5.8%. Meta fell 3.7% and Alphabet 2.5%. A closely watched semiconductor index extended its losing streak to eight sessions, and by CNN's count was already roughly 20% below its June peak before Friday's drop. Semiconductor ETFs lost roughly 10% to 12% on the week depending on the fund.

The trigger: borrowing costs

The selloff began Wednesday, when a hot U.S. inflation report raised the odds of more Fed rate hikes and sent the Nasdaq and S&P 500 to their worst day since July. The fear isn't only slower growth. Many AI companies have financed their data-centre build-outs with debt, and with bond yields around the world at their highest levels in years, investors worry they can't keep borrowing and spending at the current pace.

Broadcom CEO Hock Tan warned at a conference in Singapore on Monday that access to capital could become the industry's next constraint. AI infrastructure firms that rent out computing capacity, such as CoreWeave, were among the hardest hit as the concerns spread to larger names.

Not everyone is alarmed. Nvidia CEO Jensen Huang has said the worries will pass, and the Associated Press noted that expectations for corporate profit growth this earnings season remain high, which is what allowed U.S. stocks to hit records despite high inflation.

Why Canada barely noticed

The S&P/TSX composite rose 0.11% to 36,176.55 on Friday, helped by a 2.77% jump in the energy index as oil climbed, with uranium miner Denison Mines the top gainer at 9.3%. The index is weighted more heavily toward financials, energy and materials than the Nasdaq is, which is why it has been largely decoupled from the AI swings. That insulation cuts both ways: the TSX gets less of the upside when AI stocks rally, and it leans harder on oil and bank earnings.

The bigger picture

The IMF's October outlook credited AI investment with propping up global growth while flagging the debt behind it as a risk. This week gave a small preview of how that risk could surface: not through a collapse in demand for chips, but through the cost of financing them. The next tests are the remaining earnings reports this season and the Fed's October 27-28 meeting.