AI Chip Selloff Sinks Nasdaq 4.5% as Brent Nears $110 Before Fed

A week when record profits didn't stop the selling

The week of October 12–16 showed a market that no longer rewards strong AI results by default. On Friday the Nasdaq Composite fell 2.14% to 26,140.03, and the S&P 500 dropped 1.09% to 7,659.44. Both indexes closed below their 50-day moving averages.42 The Nasdaq lost about 4.5% over five sessions, which ended a four-week winning streak. The S&P 500 fell roughly 2%, its fourth weekly loss in six weeks.41 The Dow went the other way. It slipped 0.34% Friday to 52,002.41 but still gained 0.7% on the week, helped by energy names such as Chevron.42

Outlets measured the damage differently. CNBC and a CNN-sourced recap called it the Nasdaq Composite's worst week since June.4246 Bloomberg said the Nasdaq 100 had its worst week since the April 2025 tariff turmoil.45 The two claims are less contradictory than they look. One describes the broad composite and the other the narrower large-cap index, which is more exposed to AI stocks. Either way, this was the sharpest rotation out of tech in months, and it arrived only about 10 days after the Nasdaq and S&P 500 hit record highs.46

Chipmakers: beats that didn't matter

Semiconductors were at the center of the sell-off. Bloomberg said chipmakers fell for an eighth straight session, their longest losing run since 2008. The worry was whether spending on AI infrastructure has gotten ahead of companies' ability to earn a return on it.45 A widely watched semiconductor index fell 3.8% Friday and 11.4% for the week. That left it more than 20% below its June peak, although it was still up over 50% for the year.46 The VanEck Semiconductor ETF lost about 10% for the week, its biggest weekly drop since April 2025, with Micron, AMD and Sandisk leading Friday's declines.42

The selling came despite very strong earnings from the two most important companies in the chip supply chain. TSMC reported third-quarter revenue of NT$1.494 trillion, up 50.9% from a year earlier, and net income of NT$763.06 billion, up 68.7%. In dollars, revenue was $46.72 billion.15 The company guided fourth-quarter revenue to $52.3 billion–$54.3 billion.15 That was well above the roughly $48.8 billion consensus figure MarketBeat cited, though MarketBeat also put quarterly revenue at $46.87 billion, slightly different from TSMC's own number.16 Chief executive C.C. Wei said demand was "extremely robust" with no sign of a slowdown. TSMC raised its full-year growth outlook to around 44% and kept capital spending at $60 billion–$64 billion.13

ASML's quarter was equally strong. Net income reached about €4.96 billion on sales of €11.66 billion, well above the €4.1 billion profit consensus, while revenue came in just short of estimates.19 The company raised its full-year revenue guidance to €44 billion–€45 billion. Its chief executive said customers were already discussing orders for 2029 and 2030.13

TSMC's U.S. shares still fell. They lost 2.28% on Friday to $412.61.17 Coverage disagrees about what that means. A Korean business outlet read the results as evidence that the chip buying spree is "far from over" and that the panic was overdone.13 A Forbes analysis argued the reverse: the market has stopped asking whether AI demand is real and started asking how much new capacity these profits will attract. In that view, Micron's 87% gross margin and TSMC's spending plans are reasons for caution, not celebration.11

Our reading favors the skeptics on stock prices, if not on fundamentals. When guidance beats by several billion dollars and the stock still falls, the market is pricing the cost of capital and the risk of oversupply, not demand. TSMC's own numbers hint at this. Its gross margin slipped 1.3 percentage points from the previous quarter to 66.4%, partly because of the 2-nanometer ramp.13 Investing.com reported that management expects further margin dilution through 2028 from overseas fabs.18

The financing side of the AI buildout made things worse. CoreWeave fell 12% Friday, even though its bonds had recently traded at levels that usually signal distress.45 It lost about a quarter of its value over the week, despite a brief rally after Nvidia CEO Jensen Huang voiced support.46 Reports of slower-than-hoped revenue growth at Anthropic also weighed on AI sentiment ahead of a possible IPO.41 Asia was hit hardest. South Korea's Kospi fell 14.5% for the week, its worst since October 2008, as Samsung and SK Hynix dropped nearly 20% and 25%.42 Thursday's 7.6% Kospi drop triggered a circuit breaker.47

Rates: a hold is expected, but not guaranteed

The link between chips and macro this week was the cost of money. CNN tied the global chip rout to a hot U.S. inflation report that raised fears that higher rates would make AI investment more expensive to fund, since many AI companies already carry heavy debt.47 Headline September CPI came in at 3.7%.40 Producer prices also beat expectations, and Fed officials said they were troubled by the hot data.41

The federal funds target sits at 3.75%–4% after a unanimous 25-basis-point hike in September, and the next decision is due October 28 at 2:00 p.m. ET.1 September minutes showed most participants expected another hike by year end, without saying when.3 Markets still expect a pause this month. Futures put the odds of an October hike at about 15% on Friday morning.6 J.P. Morgan Wealth Management's base case is also a hold, though it expects 50 basis points of total further tightening at some point. New York Fed President John Williams said there was "no need for urgency."4

The weak jobs report is the main reason. September payrolls rose just 29,000, and a December hike was priced at roughly 75%–85% as of October 9.7 CNBC's analysis warns that Chair Kevin Warsh has rejected traditional forward guidance, which leaves room for a surprise.6 The timing is also unusual: the decision lands a week before the November 3 midterms.7 The pre-meeting blackout began October 17, so no more Fed guidance is coming.7 We expect a hawkish hold. The bigger risk is the tone of the statement, not the rate decision itself.

Oil: a risk premium that keeps rising

Oil is the variable that could change the Fed's math. On Friday, Brent jumped 3.7% to $109.86, its strongest close since May 19. WTI settled at $101.41, its highest since mid-September. Over the week Brent gained 4.9% and WTI 10.4%.27 CNBC linked the move to rising U.S.-Iran tensions and the Russia-Ukraine conflict.42

Earlier in the week the reporting looked calmer. OilPrice.com described Brent as stuck near $105, balanced between frequent transits through the Strait of Hormuz and frequent Iranian drone attacks, while hurricane-related shut-ins in the Gulf of Mexico faded.21 Friday's spike broke out of that range. Shipping data put Hormuz flows at about 68% of baseline capacity.29 Houthi attacks reached a Saudi Aramco building in Dhahran, and new U.S. sanctions targeted Iranian oil-finance networks.23 On the supply side, IEA members agreed to release the remaining 100 million barrels of their emergency package.22 The U.S. sought bids to exchange up to 17 million barrels from the Strategic Petroleum Reserve.27 Washington is also considering easing restrictions on Russian shadow-fleet tankers.25

ING analysts argue that fully removing the risk premium would take some kind of U.S.-Iran agreement.22 Until that happens, oil above $100 is not just an energy story. It feeds directly into the inflation data that makes the Fed's December decision a live one.

Bitcoin: steadier, but not a hedge

Crypto behaved like a high-beta macro asset. Bitcoin fell below $81,000 after the CPI release, and nearly $1 billion in leveraged positions were liquidated.40 It briefly dipped under $80,000 on October 15–16, then recovered to about $81,500–$81,700 by Saturday. That left it down only about 1% for the week, a smaller loss than the Nasdaq's.39 Spot bitcoin ETFs had already seen $681 million of weekly outflows the week before.33 Corporate holders Strategy and Metaplanet now face possible exclusion from MSCI indexes.34

Bitcoin's relative resilience is real, but it shouldn't be confused with safe-haven demand. Traders see $80,000 as the key support level.40 A hawkish surprise on October 28 would test it.

What to watch

All three sell-off drivers point to the same date. If the Fed signals that December is still likely while Brent stays near $110, the high cost of financing AI will stay at the center of the debate. If the Fed sounds softer, the chip earnings that went ignored this week could start to matter again.