AI stocks extend selloff as Nvidia turmoil hits neoclouds and chipmakers

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AI stocks selloff hits chipmakers

Highlights

Nasdaq-100 drops 2.2% and Philadelphia SE Semiconductor index falls 6%, together threatening a nearly $1.54 trillion market value wipeout if losses hold.
CoreWeave and Nebius Group, neocloud firms backed by Nvidia, plunge 10.8% and 12.1% after CEO Jensen Huang's abrupt exit raises financing concerns.
Advanced Micro Devices falls 10.2%, Broadcom drops 6.7%, and data storage majors Western Digital and Sandisk decline 7.7% and 9.3% amid sector-wide AI-linked selloff.

Financing concerns pressure AI-linked shares

As reported by Reuters, shares of AI-related U.S. companies fall again on Friday, with neocloud firms among the hardest hit after Nvidia CEO Jensen Huang's abrupt exit unsettles investors. The tech-heavy Nasdaq-100 declines 2.2% and is on pace to erase almost $870 billion in market value if the losses hold through the close, while the Philadelphia SE Semiconductor index sheds 6% and faces a more than $670 billion wipeout for the day.

CoreWeave and Nebius Group, two neocloud companies backed by Nvidia, slump 10.8% and 12.1%, respectively, extending sharp losses from Thursday when Huang steps down after revelations of extramarital affairs. Nvidia, under Huang, has financed infrastructure built around its chips, a strategy that has supported demand but also prompted questions about circular funding flows between the chipmaker and its customers.

Thomas Hayes, chairman of Great Hill Capital LLC, says the departure is a short-term blow to the industry because vendor financing and financing guarantees tied to Nvidia and Huang are now in question. Adding to the pressure, a British cloud provider also backed by Nvidia amends its IPO filing to say it expects a net loss of $1.7 billion in the nine months ended September 30, wider than the $433.3 million net loss a year earlier.

Sector fallout extends beyond neoclouds

Chip stocks, widely seen as some of the biggest winners of the AI boom, also move lower. Advanced Micro Devices falls 10.2% and Broadcom loses 6.7% after both gained over the previous five sessions, while memory chipmaker Micron Technology sheds 5.6%.

Data storage companies Western Digital and Sandisk dip 7.7% and 9.3%, respectively. Utilities and equipment suppliers exposed to the AI boom, including GE Vernova, Constellation Energy and Vistra, ease about 2% to 3.3% each.

Investors are now looking to Nvidia's quarterly earnings and AI lab Anthropic's expected public markets debut next week as potential catalysts for sentiment across the sector. Steve Sosnick, chief market analyst at Interactive Brokers, says uncertainty around Nvidia is now the market's central problem.

We have previously noted how the Nvidia CEO resignation pressured shares amid governance and legal scrutiny.

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