Chip stocks post longest losing streak since 2006 amid AI bubble fears

Volatility in technology markets intensified this week as the Philadelphia Semiconductor Index recorded its longest losing streak since 2006, declining for eight consecutive days. The Nasdaq lost over 5% during the period, marking its worst week since June, while short-sellers are estimated to have earned more than $30 billion in seven days. The sell-off was driven by concerns over the high cost of capital for AI infrastructure, with Bloomberg Intelligence estimating that major cloud companies are heading toward $1 trillion in annual investments largely financed with borrowed money. Rising interest rates, including a 10-year US Treasury yield that reached 5.10%, increased the cost of this debt and reduced the present value of future returns. CoreWeave, which finances its expansion through high-yield bonds, saw its stock drop 14% at one point as its bond yields approached levels typical for distressed firms. A Financial Times report indicated that Entropic is negotiating with Blackstone to finance a new chip deal at interest rates exceeding 10%. Opinions on the sector's trajectory are sharply divided. Charles Gasparino of Fox Business compared the situation to the dot-com bubble, citing debt-fueled spending, while NVIDIA CEO Jensen Huang dismissed the concerns, stating the AI trend is transformative. Elon Musk argued that compute supply remains "insanely tight," noting that SpaceX cannot find spare capacity at major cloud providers. Conversely, ARK Invest CEO Cathie Wood suggested that current fear indicates the market is not in a bubble, comparing the phase to being "in the parking lot" before the game begins. Despite the volatility, spot GPU rental prices rose for 17 consecutive days, and ARK Invest bought shares in CoreWeave and Cerebras.