Nikkei plunges as CoreWeave debt fears hit AI stocks

Japan's Nikkei 225 fell about 5% on Thursday, October 15, as a global sell-off in technology stocks spread to Tokyo. The losses followed overnight reports that bonds issued by US cloud-computing provider CoreWeave ↘ 11.91% were trading at distressed levels, and hotter-than-expected US inflation data that raised fears of higher interest rates. The index had its sixth straight losing session and was headed for its worst day since March.brecorder.com+2

AI-linked stocks lead losses

Most of the selling hit chip and AI stocks. Chip-testing equipment maker Advantest dropped about 15%, Tokyo Electron lost more than 7%, SoftBank Group fell around 9%, and memory maker Kioxia slid 12%. The broader Topix fell 2.5% by midday.morningstar.com+1

"Concerns have been raised that the financial health of AI-related companies may be deteriorating," Nomura strategist Wataru Akiyama said. He added that worries about AI capital spending and the profitability of the AI business had "risen rapidly". Investors moved into defensive stocks. Pharmaceuticals were the best-performing sector, and Sumitomo Pharma rose 13%.brecorder.com

CoreWeave and Oracle drag Wall Street

The sell-off started in New York on Wednesday. The Nasdaq Composite fell 2% and the S&P 500 lost 1%, ending a 53-session run without a 1% decline. CoreWeave led the losses, and Oracle fell 9% amid worries about its own rising debt costs.cnbctv18.com

CoreWeave shares dropped 15.5%. The yield on its 9.625% bond due in 2032 rose to 14.8%, and the yield on its 2031 notes reached about 14.9%. The company's 2032 debt traded below 80 cents on the dollar, a level widely seen as a sign of financial strain. CoreWeave's debt and lease obligations totaled about $52 billion at the end of June. Chief Executive Mike Intrator wrote in an internal memo that the company's deal backlog is more than enough to cover its debt, and he said the market was acting "irrationally".cnbc.com+3

Inflation revives rate fears

Inflation data added to the pressure. US consumer prices rose 3.7% year-on-year in September, above the 3.6% forecast, and core CPI also came in above estimates. After the release, CME FedWatch put the probability of a 25-basis-point Federal Reserve rate hike at 37%, up from 23%. Other chip stocks fell too, with Nvidia ↘ 1.43% down 3% and AMD Advanced Micro Devices, Inc. ↘ 5.95% down 6%. Investors are now looking to results from TSMC Taiwan Semiconductor Manufacturing Company Limited ↘ 2.28% and US wholesale inflation data due Thursday.cnbctv18.com