US STOCKS-S&P 500, Nasdaq set for steep weekly losses as AI jitters rattle investors

By Tharuniyaa Lakshmi and Purvi Agarwal

Oct 16 (Reuters) - The benchmark S&P 500 and Nasdaq were set to end the week in the red, with technology stocks coming under more pressure on Friday over cracks in the AI trade and adding to losses.

The S&P 500 information technology index .SPLRCT fell 1.5% and was the biggest drag. Nvidia-backed CoreWeave CRWV.O slid 10.3% on lingering debt concerns. The data centre operator's bonds sold off sharply this week, pushing yields to above 15%.

Semiconductors bore the brunt of the selloff, with the broader chips index .SOX dropping 1.8% — set for its steepest eight-session percentage decline since the "Liberation Day" selloff in April 2025.

Most megacap stocks tumbled and brought the Nasdaq close to a one-month low. Meta META.O slipped 2.3% and Microsoft MSFT.O lost 1.8%.

AI stocks have cratered this week over concerns that data centre operators might not turn profitable in time to repay debts, particularly with borrowing costs expected to rise. Worries over rising competition from China also dented sentiment.

"When investors start worrying that AI names are overvalued, they gravitate toward lower-multiple stocks with stable cash flows," said Dennis Dick, founder and market structure analyst at Triple D Trading.

Adding to concerns around AI financing, some current Anthropic investors and prospective investors are weighing a lower valuation for the company in its upcoming IPO, Reuters reported, citing people familiar with the matter.

At 12:19 p.m. ET, the Dow Jones Industrial Average .DJI fell 14.74 points, or 0.03%, to 52,162.95, the S&P 500 .SPX lost 43.53 points, or 0.56%, to 7,700.38 and the Nasdaq Composite .IXIC lost 348.31 points, or 1.30%, to 26,364.72.

Most other S&P 500 sectors rose. The energy index .SPNY was the biggest percentage gainer, up 1.5%, while the financials index .SPSY rose 1%.

Gains in Goldman Sachs GS.N and JPMorgan Chase JPM.N lifted the Dow to its highest level in over a month. The index is set for a weekly advance, with investors rushing to defensive sectors such as healthcare and consumer staples.

"What we're seeing now is money rotating out of a very crowded AI trade and into value names," Dick added.

The S&P 500 was set for its steepest weekly loss since early June, faced with an AI-led rout, mixed bank earnings and inflation data. The Nasdaq eyed its sharpest weekly fall since June 22.

Hotter-than-expected consumer and producer inflation reports this week have confirmed that price pressures are extending beyond energy products.

Federal Reserve Chair Kevin Warsh also said a spending surge was boosting inflation, but added that the US economy remained resilient and benefited from the AI-driven investment boom.

Markets increasingly expect the Fed to keep interest rates unchanged this month. Barclays now expects 25 basis point hikes each in December and January.

Meanwhile, Tesla TSLA.O failed to hold on to gains from before the bell — as much as 3% — after unveiling a redesigned Roadster, powered by rocket-style thrusters, developed in collaboration with SpaceX.

Netflix NFLX.O appointed former Disney executive Peter Rice as chief content officer on Thursday. Its shares were down 2.6%.

Advancing issues outnumbered decliners by a 1.04-to-1 ratio on the NYSE and by a 1.94-to-1 ratio on the Nasdaq.

The S&P 500 posted 17 new 52-week highs and no new lows while the Nasdaq Composite recorded 46 new highs and 200 new lows.