AI stocks plunged last week, with the Nasdaq dropping 4.5% for its worst week since June. Hotter-than-expected inflation data fed concerns that the Federal Reserve will keep interest rates elevated. The iShares Semiconductor ETF fell for nine straight sessions, and neocloud CoreWeave lost 25% after its debt worries spiked.
The S&P 500 fell 2%, but the Dow rose 0.7% as investors shifted into healthcare, consumer staples, and other defensive areas. That rotation underscores the value of diversification, especially after the AI trade had dominated. Cybersecurity names like Palo Alto Networks and CrowdStrike were hit hardest, while Meta and Microsoft finished down only about 1% after showing resilience.
Bank earnings were largely solid but didn't lift the sector, as investors worried more about the economic outlook. Elevated oil prices and borrowing costs remain key risks for the AI infrastructure buildout, with Broadcom's CEO warning that capital access could become a major constraint. The CNBC report suggests patience with high-quality companies and a diversified portfolio may be the safer path while the rotation lasts.