Investors React to $2 Trillion Loss in Chip Stocks Amid AI Debt Concerns

Chip stocks have seen a dramatic decline, erasing approximately $2 trillion in value over the past eight sessions—the longest losing streak for the sector since 2008. This downturn has sparked doubts among investors regarding the viability of artificial intelligence (AI) spending, particularly as yields on U.S. Treasury bonds rise above 5%.

The Philadelphia Semiconductor Index, which tracks U.S.-listed chipmakers, fell more than 11% last week, leading to discussions among financial experts about whether this represents a buying opportunity or a continuation of a broader market unwinding. The recent inflation readings have intensified expectations for further interest rate hikes by the Federal Reserve, with minutes from their September meeting indicating that most officials anticipate another rate increase in 2026.

As concerns about high yields mount, some analysts are turning to credit default swaps (CDS) as a means of hedging against potential defaults in the AI sector. Trading volumes for CDS linked to major tech companies like Oracle, SpaceX, and Nvidia surged to over $9 billion per week in September, up from below $2 billion in July. This indicates a growing apprehension regarding the financial stability of firms heavily invested in AI.

Among the companies facing scrutiny is CoreWeave, a data-center operator with nearly $50 billion in debt, which has seen its CDS spread exceed 1,100 basis points, implying a default probability of around 63-64%. In contrast, larger firms such as Oracle and Nvidia have also experienced rising CDS spreads, reflecting a broader concern regarding the sustainability of AI-related investments.

As the market navigates these challenges, investors are closely monitoring upcoming earnings reports from key players in the semiconductor and AI sectors, including Lam Research and Texas Instruments. The focus will be on whether AI spending can generate sufficient returns to justify the mounting debt and high interest rates.

New Insights on Chip Stocks and Crypto Markets

• Tom Lee, Chairman of BitMine, highlights that de-risking in the US, South Korea, and Taiwan is impacting crypto markets.
• Ethereum (ETH) has decreased by 1.91% over the past week, while Bitcoin (BTC) has seen a slight drop of 0.177%.
• The KOSPI index in South Korea fell by 17% in October, with Samsung Electronics and SK Hynix experiencing losses of 19.74% and 28.38%, respectively.
• Forced liquidations of leveraged traders in South Korea exceeded 50 billion won for four consecutive sessions through October 16.
• In Taiwan, the TAIEX index declined by 1.73% during the same period, with a notable drop of 3.41% on October 15.
• Korean investors contributed a net $1.4 billion into BitMine shares in 2025, indicating significant regional interest in crypto assets.
• Bitcoin is currently trading at $81,385, down 1.21% in the last 24 hours, while ETH is at $2,387.07, down 1.47%.
• ETH is approximately 52% below its peak of $4,946.05 from August 24, 2025, while Bitcoin is about 35% below its high of $126,080 from October 6, 2025.
• Lee suggests that the current price declines could present attractive buying opportunities if fundamentals remain strong.