US technology stocks suffered their steepest decline in three months, wiping out around $850 billion in market value as hotter-than-expected inflation data reignited concerns over further interest rate hikes by the Federal Reserve. High-growth technology and artificial intelligence stocks bore the brunt of the sell-off as investors reassessed valuations and the outlook for borrowing costs.
The US Bureau of Labor Statistics, part of the US Department of Labor, reported that annual consumer inflation accelerated to 3.7% in September, reviving concerns that the Federal Reserve may need to tighten monetary policy further. Higher interest rates typically weigh on technology companies, particularly those whose valuations depend heavily on future earnings growth, as borrowing becomes more expensive and the present value of future cash flows declines.
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Semiconductor Stocks Lead The Sell-Off
Semiconductor stocks witnessed the biggest declines of the market rout. The iShares Semiconductor ETF, which tracks the sector, fell 4.5%, reflecting broad-based selling across chipmakers.
Nvidia and Meta Platforms, two of the biggest technology companies by market value, declined more than 3% each, adding to the pressure on the Nasdaq. Given the index’s heavy concentration in large technology companies, sharp losses among a handful of heavyweight stocks can have an outsized impact on its overall performance.
Oracle witnessed an even steeper decline, with its shares tumbling 8.8% during the session.
The sell-off also extended to companies involved in AI infrastructure, which have attracted significant investor interest amid rising demand for computing capacity. However, these businesses can be particularly sensitive to higher borrowing costs because of their capital-intensive operations and funding requirements.
Nvidia-backed CoreWeave plunged nearly 17%, while Nebius Group fell 10%, underscoring the extent of the pressure on AI-linked stocks.
Apple Bucks The Trend
Apple was among the few major technology stocks to trade against the broader market direction. Its shares gained 0.5%, providing a limited cushion against the wider sell-off.
The gain also left Apple’s standalone market capitalisation above $5 trillion, highlighting the company’s scale even as investors pulled back from much of the technology sector.
The sharp decline highlights how sensitive technology valuations remain to changes in inflation expectations and the interest rate outlook. With inflation accelerating, investors are likely to pay closer attention to upcoming economic data and signals from the Federal Reserve for clues about the direction of monetary policy.
For AI-linked companies, the latest sell-off also underscores the risk that elevated valuations and substantial infrastructure spending could leave stocks vulnerable when borrowing costs and market expectations shift.
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