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Tech had its worst week since June
The Nasdaq fell 2.1% on Friday. Oil jumped, and the money ran to energy and defense.
The Close A bad day for tech and a quiet one for everything else. The S&P 500 fell 1.1% to 7,659. The Nasdaq lost 573 points, or 2.1%. The Dow held up best, down 175 points, or 0.3%. Small companies fell too. The Russell 2000 lost 1.7%. For the week, the Nasdaq fell 4.5%, its worst week since June, and the S&P gave back about 2%. The Dow still finished the week up 0.7%.
Tech took the hit. All but seven of the 75 tech stocks in the S&P closed lower. Super Micro fell 9.9%, Palantir 7.2% and Palo Alto Networks 7.6%. The chip makers sank again: AMD lost 6.0%, Intel 5.8% and Micron 5.6%. Moderna fell 7.8% as investors took profits ahead of new cancer vaccine data. The stock had climbed more than 600% this year. Netflix slipped 2.9% after a shake-up in its content team, a few days before it reports. Oil and gas names led the winners. Targa Resources rose 4.4%, Diamondback 4.3% and Kinder Morgan 4.2%. Defense stocks rallied too, with Northrop Grumman up 4.1%. What The Market Is Pricing In Thursday's story was hopeful: hot inflation, but the economy cools and the Fed can relax. Friday's story was about who pays for AI. The companies building AI data centers spend enormous sums, and a lot of that money is borrowed. The ten-year yield sits near 5.1%, close to its highest level since 2002, so that borrowing is getting expensive. CoreWeave, which rents out AI computing power, fell sharply again on worries about its heavy debt. Then oil added to the pressure. Brent crude rose 3.7% to $109.86 after new attacks on shipping in the Strait of Hormuz. That keeps inflation high, which keeps rates high, which makes the AI borrowing bill bigger. So investors sold what looked expensive and bought what looked safe. On Wall Street they call this rotation: the money doesn't leave the market, it changes seats. Energy, utilities and consumer staples all rose while tech fell 3%.
I've seen this before. In 2000 and 2001, telecom companies borrowed heavily to lay fiber-optic cable for the internet boom. When borrowing got harder, many of those stocks collapsed, and several of the companies went bankrupt. That's not today, at least not yet. AI demand is real, and Bank of America says the AI chips already installed are running at close to full use. But the market wants to see that money coming back. This week, it gets its first answers. What's Next Three things I'm watching this week: 01 Netflix Netflix reports Tuesday, October 20, after the close. The stock fell Friday after a shake-up in its content team, following its biggest round of layoffs in four years. Investors want subscriber growth and a clear plan. 02 Big Tech Wednesday Tesla, Meta, Lam Research, Texas Instruments and IBM all report Wednesday, October 21, after the close. Meta tells us how much it plans to spend on AI. Lam Research tells us whether the chip makers' customers are still buying. One strong night could stop the chip slide. 03 Oil and the Fed Brent sits near $110, and gas averages $4.33 a gallon. The Fed is in its quiet period ahead of its October 27-28 meeting, so no officials will speak this week. Traders expect no change in October. For December, they now put the odds of a hike at 74%, according to CME Group, up from 50% a month ago. Tech's worst week since June. The market now wants proof that AI's borrowing pays off.
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