U.S. stocks fell across the board on Friday as investor worries mounted over whether artificial intelligence-related companies can generate sufficient profits in time to service their hefty debt loads, with the technology sector bearing the brunt. The Nasdaq Composite sank about 4.5% for the week, its largest weekly decline since the week of June 26.

Concerns over the debt risk of AI infrastructure companies continued to intensify. Yields on some CoreWeave, Inc. (ASX: CRWV) bonds briefly breached 15% on Thursday and remained at elevated levels on Friday. CoreWeave, Inc. (ASX: CRWV) shares tumbled another 12% on Friday and are now down more than 50% from their high for the year.

Meanwhile, Federal Reserve Chair Warsh declined to offer any guidance on the outlook for the October rate meeting at an International Monetary Fund event in Bangkok, leaving the market without policy direction to lean on. Long-dated U.S. Treasury yields pushed further higher amid rising oil prices and inflation concerns, with the 10-year yield climbing to 5.097%.

The wave of selling in semiconductor and technology stocks spread from Wednesday into Asian markets, with South Korea's KOSPI plunging 14% for the week, its largest weekly drop since the 2008 global financial crisis, and now down more than 37% from its summer peak.

Credit Stress Becomes the Core Pain Point for Tech Stocks

The deeper logic behind the technology sector's decline lies in growing market concern over the mismatch between the pace of AI commercialization and financing costs.

CoreWeave, Inc. (ASX: CRWV) has borrowed at least $35 billion to build data centers. Despite a public endorsement from Nvidia CEO Jensen Huang, one of its largest suppliers, the stock still fell 12% in a single day.

Lorenzo Di Mattia, founder and chief investment officer of hedge fund firm Sibilla Capital, said, "As credit and capital costs rise to unbearable levels, companies will sooner or later have to scale back plans and cut capital expenditures." Lorenzo Di Mattia said he currently holds a small short position in U.S. stocks.

Nvidia shares fell 1.4% to $214.13, while fellow CoreWeave supplier Dell Technologies dropped 4.6% to $451.71. Dell slumped more than 22% for the week, its largest weekly decline since relisting in 2018.

JJ Kinahan, senior vice president at CBOE Global Markets, noted, "We are in a high-risk zone, but this kind of credit stress often breeds merger and acquisition activity, which is a common outcome in such situations."

Fed Stays Cautious, Treasury Curve Shows Divergence

The U.S. Treasury market showed a clear divergence along the curve, reflecting complex market expectations for inflation and growth prospects.

The 10-year Treasury yield rose 0.011 percentage point to 5.097%, while the 30-year yield rose 0.009 percentage point to 5.436%, partly recovering Thursday's losses but still marking its largest weekly decline in more than a year.

By contrast, the 2-year Treasury yield fell 0.013 percentage point to 4.734%, completing its largest weekly drop since August.

Warsh's remarks at the International Monetary Fund event in Bangkok were broadly cautious, as he declined to provide forward guidance on the rate path for the October policy meeting. Rising oil prices and broader inflation concerns were the main drivers pushing long-end yields higher.

Structural Divergence: Banks and Defensive Tech Hold Up Better

Amid the broad sell-off, some sectors showed relative resilience, indicating clear divergence within the market.

The financial sector was one of the few bright spots, with regional bank holding companies such as M&T Bank and Citizens Financial posting broadly strong quarterly results. Apple shares edged up 0.4% to $343.46. The company has consistently been more cautious than peers in its AI strategy, and early orders for its foldable smartphone, the iPhone Duo, have been solid.

In cybersecurity, Varonis Systems shares rose 2.9% to $48.72 after privately held Proofpoint announced it would acquire the data security company for about $6.3 billion to strengthen its position in AI security.

Among small caps, the Russell 2000 slipped further into correction territory, with its year-to-date gain narrowing to about 10%.