Nvidia shares declined more than 2.5% on Thursday, pushing their losses across the past five trading sessions to roughly 8%, as a broad sell-off in artificial intelligence-related equities gathered pace. The iShares Semiconductor ETF shed more than 11% over the same stretch, underscoring how widely the weakness spread across chipmakers.
The retreat followed a hotter-than-expected US inflation reading on Wednesday, which suggested price pressures are widening beyond energy and could keep interest rates elevated for longer. September's Producer Price Index rose 1.3% month over month and 6.3% annually, both above economist estimates. Higher borrowing costs raise the expense of building data centres and expanding computing capacity, while also pushing investors to demand clearer evidence of returns on AI-related capital spending.
TSMC's cautious 2027 outlook adds to pressure
Sentiment weakened further after Taiwan Semiconductor Manufacturing Company issued a guarded assessment of its business outlook for 2027, pointing to macroeconomic uncertainty and strain in consumer and price-sensitive markets. "Looking ahead, we continue to observe consumer and price-sensitive end-markets segments are being challenged due to the impact of rising component prices and macroeconomic uncertainties," CEO C.C. Wei said on an earnings call, adding that the company is "being prudent in our business planning going into 2027."
TSMC nonetheless reiterated that demand continues to far outstrip its supply capacity, and lifted its full-year 2026 revenue growth forecast to about 44% from a prior projection of more than 40%. Its US-listed shares still fell 3% on Thursday.
Anthropic's revenue growth fails to reassure
Reports on Anthropic's third-quarter results also did little to steady the market. The Claude developer generated $16.8 billion in revenue in the September quarter, according to the Financial Times, a sequential increase of nearly 50%. That, however, marked a sharp deceleration from the roughly 145% sequential growth recorded in the second quarter.
"The market appears to be reading the Anthropic update as negative, which is understandable considering how on-edge the market has been anyway about the AI trade," DA Davidson analyst Gil Luria wrote in a note, describing the update as "more mixed." Anthropic reportedly posted positive cash flow in the quarter, which Luria said could help show that Anthropic and OpenAI are not "inherently unprofitable businesses that could never be profitable."
Investors scrutinise AI financing models
The pullback reflects growing scrutiny of how AI demand, financing needs and profitability fit together. "For much of the rally, accelerating AI investment was enough to lift almost everything exposed to the theme. Now markets are becoming more demanding about profitability, financing and capital discipline," said Charu Chanana, chief investment strategist at Saxo. She said there is insufficient evidence of a systemic AI credit crisis, but added that "the financing model behind the infrastructure boom is facing greater scrutiny," and that investors should increasingly separate strong demand, sustainable financing and attractive valuations because "they are not necessarily the same thing."
Baird technology strategist Ted Mortonson said investors are increasingly asking which companies need financing and what that financing costs. "I think the street is tiring of the Bank of Nvidia, the Bank of AMD and the Bank of Broadcom," Mortonson told Yahoo Finance, referring to Nvidia, Advanced Micro Devices and Broadcom. "This is very unusual in this cycle… It's not going over well with the institutional community," he added, citing "a higher cost of capital" and "a lot of scrutiny now on circular finance."
Competition from China and the sustainability of AI spending have weighed on semiconductor shares throughout the week. The latest moves suggest investors are becoming more selective about AI-related names, balancing robust demand for computing power against rising financing costs and the need for durable profits.
This article is for informational purposes only and does not constitute financial advice.
