Semiconductor index posts longest losing streak since 2006 as AI debt-financing fears hammer chip valuations

The iShares Semiconductor ETF fell for a ninth consecutive session on Friday October 18, its longest decline since May 2006, driving the Nasdaq Composite down 2.14 percent to 26,140.03 and the S&P 500 down 1.09 percent to 7,659.44, according to multiple market sources. The tech-heavy Nasdaq fell 4.5 percent for the week, its worst weekly performance since June, while the S&P 500 dropped 1.4 percent. Goldman Sachs reported that investors this week demanded record extra yield on risky AI bonds, while other risky bonds barely moved, signaling concerns specific to artificial-intelligence infrastructure financing rather than broad credit-market stress. Analysts told multiple outlets that the market is shifting focus from the scale of AI capital expenditure to whether heavily indebted AI firms can sustain financing costs and generate sufficient cash flow as funding costs rise. CoreWeave, an AI infrastructure company, fell nearly 12 percent during the week, losing roughly a quarter of its value as investors focused on its more than 51 billion dollar debt load.

Semiconductor companies, AI infrastructure developers, and investors holding AI-linked equities face the first sustained correction since the sector's rally began in early 2025. This coincides with the Federal Reserve's September 2026 rate hike to 3.75-4.00 percent, the first increase since 2023, with Fed officials projecting at least one more hike before year-end. The constraint is whether credit markets will continue to fund multi-billion-dollar data center and chip infrastructure projects at elevated interest rates, or whether financing costs will force developers to scale back expansion plans and revise revenue targets downward.

Sources

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