Inflation exceeding expectations rekindles rate hike expectations! AI stock sell-off intensifies, Nasdaq futures continue to fall in pre-market trading.

Title context: Inflation exceeding expectations rekindles rate hike expectations! AI stock sell-off intensifies, Nasdaq futures continue to fall in pre-market trading. Text: As the latest U.S. inflation data came in above market expectations, triggering investor concerns about rising interest rates and higher financing costs for the artificial intelligence (AI) industry, U.S. AI-related stocks suffered a sell-off on Wednesday. This sell-off extended into Thursday, with stock markets in China, Japan, and South Korea all declining collectively. After the Nasdaq closed down 1.88% on Wednesday, its futures fell more than 1% again in Thursday's pre-market session. U.S. chip stocks broadly declined in Thursday's pre-market trading. As of press time, SK Hynix (SKHY.US) fell more than 6%, SanDisk (SNDK.US) and Western Digital Corporation (WDC.US) fell nearly 4%, Micron Technology, Inc. (MU.US) and Seagate Technology Holdings PLC (STX.US) fell more than 3%, Intel Corporation (INTC.US) and AMD (AMD.US) fell nearly 3%, and Qualcomm (QCOM.US), NVIDIA Corporation (NVDA.US), and Broadcom Inc. (AVGO.US) all fell more than 1%. Optical communication stocks were also hit: AXT Inc (AXT.US) fell more than 6%, while Marvell Technology, Inc. (MRVL.US), Astera Labs (ALAB.US), Credo Technology (CRDO.US), Coherent (COHR.US), Corning Inc (GLW.US), and Lumentum (LITE.US) all fell more than 3%. In addition, stocks in the AI infrastructure sector, which were concentrated in Wednesday's sell-off, extended their declines in pre-market trading: AI cloud computing company CoreWeave (CRWV.US) fell nearly 6%, AI infrastructure service provider Nebius (NBIS.US) fell more than 3%, Oracle Corporation (ORCL.US) fell nearly 2%, and Dell Technologies, Inc. Class C (DELL.US) fell nearly 4%. These stocks closed down 15.46%, 10.08%, 8.83%, and 11.27%, respectively, on Wednesday. After the September CPI release, investors will focus on the U.S. September PPI data to be released on Thursday for the latest clues on factory-gate inflation trends. If that data also exceeds expectations like Wednesday's CPI data, it could further intensify market concerns about inflation and rising interest rates, and may deal another heavy blow to already sluggish AI-related stocks. Inflation exceeding expectations boosts rate hike expectations, intensifying financing cost concerns The selling pressure mainly stemmed from a rebound in U.S. September inflation that reinforced market expectations that the Federal Reserve will continue raising interest rates. Data released by the U.S. Department of Labor on October 14 showed that, driven by higher energy and food costs, the September Consumer Price Index (CPI) rose 0.6% month over month, the largest increase since April this year; the year-over-year increase rose to 3.7%, higher than August's 3.4% and above economists' expectation of 3.6%. Excluding volatile food and energy prices, core CPI rose 0.3% month over month, unchanged from August but above the market expectation of 0.2%; the year-over-year increase rose from 2.4% in August to 2.6%, exceeding the expected 2.5%. Specifically, energy prices were the main force pushing up overall inflation. The September energy price index rose 5.2% month over month, with the gasoline price index rising 9.1% month over month, contributing more than half of the month's CPI increase. Ongoing conflict in the Middle East continued to push up fuel costs. Energy prices have risen 20.4% year to date in September, and higher fuel costs further pushed up airfare prices, with September airfare prices rising 1.2% month over month and 22.4% year to date. It is worth noting that the scope of price increases has gone beyond energy and shown a broader spillover trend. Analysts pointed out that prices for entertainment, used cars and trucks, education, airfare, healthcare, and apparel all rose. Some of these increases stemmed from tariffs and energy factors, but others indicated that inflation is more sticky. Ol Sonola, head of U.S. economic research at Fitch Ratings, said the latest inflation data "flashed a red light" for the Federal Reserve, and that the transmission of price increases to broader services sectors could increase the risk of sustained inflation. A deeper issue is that AI infrastructure construction itself is becoming a driver of inflation. The data center construction boom is pushing up prices for goods such as semiconductors and transmitting pressure to the broader economy through channels such as construction labor costs. The stronger-than-expected inflation data quickly reshaped market expectations for the Federal Reserve's rate path. According to the CME "FedWatch" tool, after the CPI release, traders' bets on a 25-basis-point Fed rate hike in October climbed rapidly from about 18% before the data to about 70% as of press time; bets on a December hike even approached 90% at one point, and although they have since cooled somewhat, they remain above 60%. The latest round of declines in AI-related stocks reflects investors' concerns about the AI industry's massive capital investment and rising financing costs. The question the capital market is watching is whether, as the AI industry continues to expand data center construction, huge computing power investments can ultimately generate enough revenue and cash flow to cover rising construction and financing costs. In addition, as the AI data center construction boom continues, related companies' share prices had already risen sharply, making their high valuations more vulnerable to shifts in market expectations. Jefferies Financial Group Inc. economist Mohit Kumar said: "If AI infrastructure construction slows, it means U.S. economic growth expectations will cool significantly." However, he said: "We expect the earnings season to prove that corporate earnings and demand remain strong." But he also noted that Jefferies Financial Group Inc. plans to take appropriate profits and reduce some positions before the U.S. midterm elections. Anthropic Q3 financial data "not good enough" Another reason for the AI stock sell-off was Anthropic's latest results, which were "good but not good enough." According to reports, Anthropic disclosed at a closed-door pre-IPO investor day in San Francisco that its third-quarter revenue reached $16.8 billion, up nearly 50% from $11.5 billion in the second quarter, and that it achieved "adjusted profitability" and positive cash flow. However, the market reaction was far from jubilant. Market research firm P Equity Research said bluntly: "Anthropic's numbers are good, but not good enough." Investment analyst Geiger Capital was even more direct: "Not good enough. It's over." It is understood that the hidden concern behind the numbers is the sharp slowdown in growth. According to ZeroHedge calculations, Anthropic's annualized revenue run rate had already reached $65 billion by the end of July this year, while the monthly growth rate implied by the third-quarter data has plunged from a previous compound monthly growth rate of about 33% to 3.4% to 6.6%. If this trend continues, the company's annualized revenue at year-end would be about $89 billion, still about $10 billion short of the previously widely expected year-end target of "more than $100 billion." The reality that Anthropic's revenue growth has plunged from 33% month over month to single digits undoubtedly dealt a blow to the high-growth narrative on which the AI industry relies. In addition, although Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) reported third-quarter results that sent a key signal that computing power demand remains strong, and the company said fourth-quarter demand is expected to remain strong, its statement that it is maintaining a cautious attitude when formulating 2027 business plans due to macroeconomic uncertainty also weighed on market sentiment. Capital constraints on AI investment surface Beyond macro-level interest rate pressure, warnings about financing constraints at the industry level became another important catalyst for this round of selling. Broadcom Inc. CEO Hock Tan earlier this week compared some investors chasing the AI boom to "gamblers," saying bluntly that many AI investors do not understand the technology they are investing in but hold extremely high expectations. He further warned that capitalnot chip supplywill become the biggest constraint on AI development. Hock Tan also questioned the actual benefits of corporate spending on AI, pointing out that AI model developers must find customers who can generate returns on investment by adopting AI technology, rather than relying on users who are still in the trial stage and constantly "wasting money" on tokens. He used a vivid analogy to illustrate the problem: "It's like when you were a kid and went to an arcade to play games. Your parents gave you $10 worth of tokens, you spent them all in 10 minutes, and you learned nothing. That is exactly what is happening in the corporate world today." These remarks sparked widespread resonance and controversy in the market. Michael Burry, the real-life figure behind the movie "The Big Short" and a well-known investor, reposted this excerpt of Hock Tan's comments on social platform X, specifically highlighting the issue that companies spend money using AI tokens but may not create actual value. Broadcom Inc.'s warning was corroborated by reality. CoreWeave, an AI cloud computing service provider, saw its unsecured bonds maturing in 2032 fall on Wednesday to less than 80% of face value, with yields exceeding 15%; its credit default swaps rose to a record high, and market pricing indicated that the company's probability of default within the next five years exceeds 50%. A D.A. Davidson analyst previously called CoreWeave the "subprime tranche" of the AI sector and warned that if the AI financing boom fades, the company may be unable to repay its high debt. Daniel O'Regan, executive director of equity trading at Mizuho Securities, pointed out that in recent weeks investors have become "increasingly unwilling to fund AI-related spending at any cost." AI capital expenditure has exceeded companies' ability to generate free cash flow, meaning companies must seek external financing to buy the hardware they need, and when external financing becomes more difficult, spending on chips and other AI infrastructure could be materially affected. A JPMorgan analyst team led by Nikolaos Panigirtzoglou wrote in an October 14 report that although the recent share price move resembles the late-July pullback, the current backdrop for AI infrastructure stocks is more unfavorable. Panigirtzoglou said the reason is that "although overall equity funds still have continued inflows, retail investors have so far lacked 'buy-the-dip' behavior, buyback flows have fallen off a cliff, the short base is insufficient, and leveraged equity ETF assets under management are higher." "Despite the recent drawdown, cyclicals do not appear oversold from a positioning or flow perspective."