AI debt fears drag Nasdaq down 2% as oil tops $100

Good morning, and happy weekend. On Friday the Nasdaq fell 2.1% and slipped below its 200-day moving average, a line many traders treat as the long-term trend. The S&P 500 lost 1.1% and finished its worst week since June. Software and chips, which had been moving separately all year, fell together, and the phrase of the day was «nowhere to hide».

The real story isn't AI itself but the debt behind it. Worries that AI profits won't grow fast enough to cover rising borrowing costs spread from CoreWeave to Alphabet. CoreWeave is down more than 60% from its post-IPO high, and the most heavily indebted names took the biggest hits. BofA warned the AI boom could end like earlier capex cycles, with too much competition and too much capacity, and the VIX fear gauge topped 22 for the first time in four months.

Meanwhile money moved elsewhere. So far in October the Dow is up about 2.5% while the Nasdaq 100 is down 1.9%, and defensive sectors like health care and consumer staples are in demand. The odd one out is bonds: CPI and PPI both beat forecasts, yet Treasury yields fell. Some read that as the bond market starting to price an AI bust and slower growth rather than inflation.

Energy is the bigger worry. With Iran widening attacks near the Strait of Hormuz and Ukraine promising more strikes on Russian refineries, U.S. crude climbed above $100 a barrel, and some forecasts see diesel at $7 a gallon this winter. On rates, Fed Chair Warsh avoided the topic at an IMF event, and futures put the odds of an October hike at about 15%.