Nvidia stock NVDA continued to fall on Thursday as a sell-off in artificial intelligence-linked stocks intensified amid concerns that rising interest rates could constrain AI investments and fresh data pointed to mounting US inflationary pressures.
Updates from Taiwan Semiconductor Manufacturing Company (TSMC) and AI startup Anthropic also weighed on sentiment, as investors reassessed the sustainability of AI spending, financing arrangements and the prospects of generating returns from the sector’s massive infrastructure investments.
Nvidia shares fell more than 2.5% on Thursday, taking their losses over the past five trading sessions to about 8%.
The iShares Semiconductor ETF dropped more than 11% over the same period, reflecting widespread weakness across chip stocks.
Inflation and financing concerns pressure chip stocks
Concerns about AI spending, financing costs and intensifying competition from China have weighed on semiconductor stocks throughout the week.
A hotter-than-expected US inflation report on Wednesday added to the pressure, pointing to price increases broadening beyond energy and potentially keeping interest rates elevated for longer.
US wholesale inflation for September, measured through the Producer Price Index (PPI), also rose 1.3% month over month and 6.3% annually, both exceeding economists’ estimates.
Higher borrowing costs could increase the expense of building data centres and expanding computing capacity, while prompting investors to demand greater clarity on the returns from AI-related investments.
Further, fresh concerns emerged on Thursday after TSMC issued a cautious assessment of its business outlook for 2027, citing macroeconomic uncertainty and pressure on 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,” TSMC Chief Executive C.C. Wei said on an earnings call.
“As such, we are being prudent in our business planning going into 2027.”
However, TSMC reiterated that demand continued to far exceed its supply capacity.
The company expects full-year 2026 revenue to grow by about 44%, up from its previous forecast of more than 40% growth last quarter. Its US-listed shares fell 3% on Thursday.
Anthropic revenue growth fails to reassure investors
Reports about Anthropic’s third-quarter revenue also failed to lift sentiment.
The Claude maker generated $16.8 billion in revenue in the September quarter, according to the Financial Times, representing sequential growth of nearly 50%.
However, that marked a sharp slowdown from the roughly 145% sequential growth reported 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 said in a note to clients.
Luria described the update as “more mixed”.
Anthropic reportedly generated positive cash flow in the third quarter, according to the Financial Times.
Luria said this could help demonstrate that Anthropic and OpenAI are not “inherently unprofitable businesses that could never be profitable.”
Investors scrutinise AI financing models
The sell-off reflects growing scrutiny of the relationship between AI demand, financing requirements and profitability.
“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.
Chanana said there was insufficient evidence of a systemic AI credit crisis, but added, “The financing model behind the infrastructure boom is facing greater scrutiny.”
“Investors should increasingly distinguish between strong demand, sustainable financing and attractive valuations. They are not necessarily the same thing,” she said.
Baird technology strategist Ted Mortonson said investors were increasingly questioning which companies needed financing and how much that financing cost.
“I think the street is tiring of the Bank of Nvidia, the Bank of AMD and the Bank of Broadcom,” Mortonson told Yahoo Finance senior reporter Brooke DiPalma, 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.
Mortonson pointed to “a higher cost of capital” and “a lot of scrutiny now on circular finance,” which he said was “coming out of the Anthropic research meeting.”
The latest developments suggest investors are becoming more selective about AI-related stocks, weighing strong demand for computing power against rising financing costs and the need for sustainable profits.
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