AI Stocks Had a Brutal Week. Is the Party Over?
The past week was a terrible one for artificial intelligence stocks.
The Nasdaq lost more than 4%, marking its worst week since June. The S&P 500 fell around 2%. And the semiconductor ETF SMH? It plunged 10% in just five days, its biggest weekly decline since April 2025.
So, is the AI party over? Or is this simply a correction?
THE MEMORY CHIP SHOCK
Let's start where the pain was greatest. In just five days, SK Hynix fell 26%, Samsung dropped 22%, and Micron declined approximately 11%.
"So why all the panic?" you might be wondering.
It all started in China. CXMT, China's leading memory chip manufacturer, announced new server memory featuring a new architecture capable of storing more data. The market feared that it could take market share away from the three major players.
Of course, there's a big catch. Many analysts doubt whether CXMT can manufacture the chips at scale. As Ben Barringer of Quilter Cheviot explained, if only half the chips work properly, you're literally throwing the other half in the trash.
And if that wasn't enough, a Korean article warned of a "flood" of new supply in 2029. Even Elon Musk commented that China would be producing "A LOT of RAM" by 2028.
Here's the bigger picture.
AI has sent memory demand soaring, pushing prices to unprecedented levels. Traditionally, however, every such boom eventually leads to increased production and falling prices.
Nevertheless, Counterpoint Research estimates that even if DRAM prices fall 23% in 2028, they will still be 230% above their 2025 levels.
Why? Because buyers and manufacturers are increasingly signing contracts lasting three to five years, with advance payments and price limits.
AI'S DEBT PROBLEM
Now let's move on to the second issue: borrowing.
To build AI infrastructure, companies are taking on debt. Alphabet, Amazon, Meta, and Oracle have issued more than $228 billion in bonds this year, more than double the amount issued throughout 2025.
However, fears are hitting weaker companies particularly hard, especially those outside the Magnificent Seven.
The biggest victim is CoreWeave. Its debt exceeds $51 billion, and its stock lost 25% in a single week. Yes, you read that correctly.
What about its bonds? They now offer yields close to 15%.
You might be wondering what that means. In simple terms, investors are demanding much higher returns to lend the company money. Credit rating agency S&P rates CoreWeave B+, placing it in speculative-grade, or "junk," territory.
As Gavan Nolan of S&P Global put it, the company spends almost like a hyperscaler but doesn't have the balance sheet to match.
CoreWeave's CEO argues that the market is "behaving irrationally."
But the company isn't the only one feeling the pain. On Wednesday, Oracle fell nearly 9%, Nebius dropped 10%, and Dell declined approximately 11%.
So, is this a systemic problem?
Michael Rosen of Angeles says it is something worth monitoring, but that we're "nowhere near" a systemic crisis.
Luis Alvarado of Wells Fargo, however, argues that the era of easy money is beginning to come to an end.
THE BATTLE FOR AMD
And this brings us to AMD, which fell nearly 16% in five days. Wall Street is now deeply divided over the stock.
On one side, Tristan Gerra of Baird has set a price target of $1,250, the highest on Wall Street, implying approximately 130% upside.
He sees substantial growth in CPUs and GPUs, driven by demand from AI data centers.
On the other side, Joseph Moore of Morgan Stanley has a price target of $465, implying a decline of around 15%.
Why? He considers the stock overvalued and believes competition with Nvidia will be extremely difficult.
What do the other analysts think?
Thirty analysts recommend buying the stock, while six recommend holding it.
The average price target stands at $662.38, implying approximately 22% upside.
Meanwhile, Intel isn't sitting idle. The company unveiled its new Crescent Island GPUs, designed for demanding AI workloads.
It is also preparing its Nova Lake processors with one clear objective: to respond to AMD's progress and strengthen its competitive position.
THE FEAR INDEX
All of this came to a head on Friday.
The Nasdaq fell 2.14%, while the S&P 500 declined 1.09%.
The VIX surged above 22 during the session for the first time in four months. It eventually closed at 19.99, up more than 21%.
So, what exactly is the VIX?
It's the volatility index, commonly known as the fear gauge. The higher it rises, the more nervous the market tends to be.
And things get even more interesting.
One investor spent $1.7 million and $1.1 million on two bets that the VIX would close above 23 by the third week of November.
In fact, nine of the ten most popular VIX contracts on Friday were bets on rising volatility.
And this week brings the big test: earnings and updates from Tesla, SpaceX, and Meta.