Key Highlights

● Nebius plunged Friday with no company-specific catalyst reported.

● Leveraged AI infrastructure names were sold as investors asked how AI will be financed.

● Applied Digital, IREN, Cipher Digital, DigitalOcean and Fastly also sold off.

● Energy led the sectors as Brent climbed $3.94 to $109.86 a barrel.

Swept up in the selloff

Nebius Group (NASDAQ:NBIS) plunged in Friday's session, finishing among the steepest decliners on the Nasdaq Composite, according to market reports. An afternoon snapshot showed the shares sharply lower, and another report showed an even steeper decline by the close. Reports differed on the size of the move, but all showed a heavy loss.

No company-specific catalyst was reported. One report attributed the decline to the broader AI infrastructure selloff. Nebius operates AI-focused cloud infrastructure, offering access to large clusters of graphics processors for training and running AI models. That business model places it in the same category as so-called neocloud providers, which have expanded rapidly to meet demand for computing power.

Leverage became the dividing line

Friday's trading drew a sharp line between AI companies that fund their growth from their own cash flow and those that rely on debt. According to market commentary, investors moved from asking what AI can do to asking how it will be financed, and debt-funded AI infrastructure names were hit hardest.

One market commentator put it this way: "The AI group is now splitting between companies that can fund the buildout themselves and those that have to borrow." The commentator added, "That is a change in character, and it's another reason the leaders no longer look like a safe haven."

The focal point was CoreWeave (NASDAQ:CRWV), whose debt totals more than $50 billion, according to market reports. CoreWeave plunged to $61.39, per market data, and a published headline reported that the cost to insure its debt hit a record. Reports described that credit stress as weighing on peers seen as having similar business models.

A crowded list of decliners

Nebius had plenty of company. Steep declines were reported in Applied Digital (NASDAQ:APLD), IREN (NASDAQ:IREN), Cipher Digital (NASDAQ:CIFR) and DigitalOcean (NYSE:DOCN). Fastly (NYSE:FSLY) also slumped, per market reports. Goldman Sachs described hedge funds' selling of AI names as a "tactical rotation" away from smaller AI names, per market commentary.

Market reports said the rotation erased more than $1 trillion from semiconductor and AI-related stocks during the week. Chip stocks extended a losing streak, with all 30 members of the PHLX Semiconductor Index falling and the index closing at 11,137.29.

Indexes slide as defensives rally

The Nasdaq Composite fell 572.99 points to 26,140.03, closing its worst week since the week ended June 26. The S&P 500 lost 84.62 points to 7,659.44, and the Dow Jones Industrial Average slipped 175.28 points to 52,002.41. The Russell 2000 fell 45.90 points to about 2,721.

Energy was the strongest sector as Brent crude climbed $3.94 to $109.86, per market data. Utilities and consumer staples also gained. The VIX rose 3.53 points to 19.99 after touching 22.31 intraday, its highest level since June 11.

Nebius Peers Watch Credit Signals

Big Tech earnings next week, including Meta (NASDAQ:META) on Wednesday, October 21, will show whether the largest AI spenders are maintaining their investment plans, per market data. The Federal Reserve's next rate decision is due October 28, a key input for borrowing costs across the sector.

Investors will be watching the credit markets for further signals on AI infrastructure financing, particularly the pricing of CoreWeave's bonds and credit insurance, which have become a barometer for the group. Any news on how Nebius and its peers fund expansion could influence the shares.