AI trade rattled by rising rates and spending worries

The AI trade has been hit by a perfect storm of headwinds over the past week, hammering shares of neoclouds, chipmakers, and major capital spenders like Meta amid rising rates and spending concerns. The sell-off was sparked by fears over CoreWeave's distressed bonds and financing costs, with its stock down 28% since October 12. Higher inflation and oil prices have fueled expectations of Federal Reserve rate hikes, increasing borrowing costs and threatening the AI infrastructure buildout. Investors are increasingly worried that hyperscalers are spending heavily with little return, as Meta's stock dropped despite solid earnings. Nvidia CEO Jensen Huang tried to reassure markets, while analysts note that rising rates and competition for capital are pressuring neoclouds to deliver profits sooner.