The week AI debt fears hit: chip index down 11%

It's Sunday, so let's look back at the week. What shook the market wasn't AI itself but the debt taken on to build it. Credit worries that started with CoreWeave spread, and the Philadelphia semiconductor index fell 11.4% in five sessions while the Nasdaq lost nearly 4%. The S&P 500 had its worst week since June, though it is still only about 2% below its record.

One camp says the AI selloff has gone too far; another says it's only beginning. Ray Dalio warned of a debt crisis in the trillions tied to AI, while a well-known tech analyst called it a healthy pullback, saying the AI game is only in the third inning. Others argued from technical indicators that it's still too early to buy the dip, so opinion is sharply split.

Where the money went is clearer. Cap-weighted indexes heavy in tech struggled, but the equal-weight S&P 500 rose for a second straight week as leadership shifted to the Dow, financials, small caps and defensives. On prices, CPI and PPI both beat forecasts, yet the 10-year yield jumped to 5.33% and then fell back. That reads as the bond market worrying more about an AI bust than about inflation.

The week ahead centers on Tesla and Meta earnings, a test of whether they can turn the AI mood around. Oil finished the week above $100 for WTI, driven by Iranian attacks near the Strait of Hormuz and Ukraine's promise to hit Russian refineries. Fed Chair Warsh refused to pre-announce the October or December decisions; futures put an October hike at about 15%, though a surprise isn't ruled out.