Chip stocks head for their longest losing run since 2008 before a Friday rebound

Chip stocks were set for their longest losing run since 2008, Bloomberg reported in its markets wrap¹. The Nasdaq slid to near a one-month low as the AI rout deepened³. Newsquawk reported stocks mixed at the US open as the AI selloff continued, with the Treasury yield curve steepening and front-end yields declining after Federal Reserve Chair Kevin Warsh again declined to give explicit guidance².

The run of losses then broke. Trading Economics reported US stocks rebounding as the chipmaker selloff eased, with chipmakers and AI hyperscalers paring losses after Nvidia’s Jensen Huang pushed back on concerns about CoreWeave, whose shares rose 5.9%⁴. Semafor reported that US stocks recovered after the multi-day technology selloff¹¹. Bloomberg reported the S&P 500 steady, down less than 0.1%, as Warsh’s remarks boosted expectations of a rate hold¹³.

What investors did with it

Fortune reported that the bloodletting in stocks was stanched as investors bought the dip and rotated out of technology, quoting an analyst who said the word of Warsh carries relatively little weight but chimed with earlier remarks from New York Fed president John Williams¹⁰. France 24 and Free Malaysia Today both attributed part of the bounce to Warsh’s speech at the IMF and World Bank meetings, where he said the technology offered large benefits to the global economy^7,8. The Straits Times reported that markets were already rising before Warsh spoke, as the chip selloff eased⁹.

Flows did not turn. Reuters reported that global equity funds drew inflows for a fourth week as Treasury yields eased, with short-term bond funds, government bond funds and corporate bond funds also attracting money⁶. European shares closed out their best week since June as earnings softened the blow from the technology selloff⁵.

What to watch

The credit side of the AI trade has not recovered with the equity side. Semafor reported that the cost of insuring against AI company defaults has spiked, with investors buying credit default swaps against highly indebted hyperscalers including CoreWeave and Oracle¹². Semafor also reported that investors moved into safer assets on concerns the AI buildout could falter against weak consumer demand and high inflation¹¹.

Reuters noted that euro-area inflation remains above the European Central Bank’s 2% target, so price pressures still need to be tamed⁵. For investors the open question in these reports is whether the Friday bounce reflects a change in the AI financing picture or only a pause in the selling^1,12.