AI and Chip Stocks Plunge as Inflation and Rate Fears Hit Tech Sector

Artificial intelligence and semiconductor stocks suffered a sharp selloff, with the Nasdaq 100 closing down 2% and chip stocks plunging 4.5%, as renewed inflation and rising interest rates undermined investor confidence in the AI boom. Rising global inflation, driven by elevated oil prices from ongoing conflicts and intense competition for raw materials from data centre investment, has forced central banks to resume rate hikes. This makes borrowing costlier for AI companies, exemplified by CoreWeave's 15.5% stock plunge to $65.80, as its financing costs would now reach 15% interest. The selloff extended beyond tech, with the small-cap Russell 2000 entering correction territory, while defensive sectors like consumer staples and healthcare fared better. European markets mostly gained, and TSMC's record results failed to revive enthusiasm, highlighting broad concerns about AI profitability.