A bond sold in June at a 9.625% interest rate now pays 14.50%, and that one number explains the week. The bond belongs to CoreWeave, a US company that rents out computing power for artificial intelligence and borrowed heavily to build it. When the price of a company's debt falls far enough that the yield reaches 14.50%, lenders are telling you they are worried about getting paid. CoreWeave's shares fell 15.5% on Wednesday night after its bond dropped below 80 cents on the dollar, and the damage spread to the companies that sell it equipment: Dell fell 11.4%, HPE 8.3% and NetApp 7.0%.
It matters because the AI build-out is increasingly paid for with borrowed money. Marcus Today counts US$274 billion of investment-grade bonds sold this year by Alphabet, Amazon, Meta, Microsoft and Oracle, against about US$30 billion a year over 2020 to 2024, and Oracle's cost of insuring its five-year debt against default has gone from about 57 basis points in mid-2025 to between 215 and 260. The IMF named the AI financing loop as a top trigger for a market shock on Tuesday. Closer to home, the Australian share market took a very different path: the ASX 200 slipped only 8 points on Thursday, because banks rallied while tech and miners fell.
Tuesday night: banks start the season. The S&P 500 fell 0.02%, the Nasdaq 0.15% and the Dow 180 points. The interest rate on the 10-year US government bond fell 2.5 basis points to 5.22% after New York Fed president John Williams said he saw no need for a rate rise in 2027 beyond one more this year. JPMorgan fell 0.9% on an earnings miss, Wells Fargo 3.1% on revenue and Citigroup 5.6% on fee income, despite its best third quarter in fixed income trading in a decade. Microsoft closed at a record.
Wednesday night: the calm breaks. The S&P 500 fell 1.11% to 7,719, the Nasdaq 1.88% to 26,693 and the Dow 49 points to 51,621. It was the first fall of 1% or more in 53 sessions and the worst night since July. US inflation for September came in at 3.7% against 3.6% expected, with core inflation (which strips out food and energy) at 2.6%, and the chance of a US rate rise this month jumped from about 20% to about 60% before settling at 32%. The chip index fell 4.3% even though Dutch chip equipment maker ASML reported well, Bank of America fell 4.8% after a US$1.21 billion fine for money laundering and sanctions failures, and Morgan Stanley fell 2.7% despite beating forecasts. The 10-year rate ended 3 basis points lower at 5.19%. Citigroup now expects a rate rise in December.
Thursday night: a bounce, with caveats. The S&P 500 rose 0.33%, the Nasdaq 0.08% and the Dow 556 points, while the equal-weight S&P 500 (every company counted the same) rose 1.4%, about 100 basis points ahead of the usual index. US producer prices (what businesses pay) rose 6.3% on the year against 5.3% expected, and retail sales rose 0.8% against 0.3%, though only 0.2% without fuel. Yet the 10-year rate fell 11.5 basis points to 5.08%, a three-week low, as money moved into bonds. The chance of an October rate rise sits at 25% to 30%. The chip index fell 0.88% for a seventh straight loss: Nvidia (-1.8%), AMD (-1.5%), Applied Materials (-3.7%), while Micron rose 1.9%. TSMC beat on profit, revenue and guidance and still fell 1.8%. ServiceNow rose 6.1% and Intuit 6.4% as software bounced. South Korea's share market, home to memory chip makers, fell 7.6% on Thursday. Past performance is not a reliable indicator of future performance.
Tuesday. The ASX 200 rose 1 point to about 8,784, after being down 29 points at midday. The big four banks led a late recovery after the Reserve Bank's minutes kept the door open to more rate rises: CBA (+2.3%), NAB (+1.9%), Westpac (WBC +1.5%) and ANZ (+1.3%). Technology fell 4.37%, with NextDC (NXT) down 7.6%, and Pilbara Minerals (PLS) fell 8.6% as Chinese lithium prices dropped. Fortescue (FMG) fell 2.9% to a one-year low.
Wednesday. The index fell 56 points (0.6%) to 8,728. CBA fell 2.2% after its annual meeting, where it ended a pay dispute with a 13% rise for staff. Evolution Mining (EVN -3.2%) missed gold production forecasts with 154,000 ounces against 164,000 expected, and Paladin (PDN) fell 9.3% on a weaker quarter. Glencore (GLN) listed on the ASX. Marcus Today reported that a typical New South Wales household spent nearly 31% of its income on mortgage repayments in June.
Thursday. The index closed down 8 points at 8,720, recovering from a low of 8,641 in the morning. The unemployment rate rose to 4.7%, a five-year high, as about 40,000 jobs were lost against a forecast gain of about 20,000. That lifted the banks, because it lowers the odds of another Reserve Bank rise: CBA rose 3.3%, Westpac 2.9% and the Big Bank Basket about 3%. Bank of Queensland (BOQ +5.9%) reported cash earnings of $358 million against $328 million expected. Against that, BHP fell 4.7%, Pilbara 6.3% and Lynas (LYC) 6.6%, and data centre names fell, with NextDC down 7.4%. EQT Holdings (EQT) rose 17.1% after private equity group TPG took 14.9% of it at $23.50 a share, while Ingenia (INA) fell 11.6% after Warburg Pincus lifted its non-binding offer to $5.25 and set a Monday deadline.
As at midday today the index is up 91 points (1.04%), with nine of eleven sectors higher. Technology is the best, up 4.75%, led by WiseTech (WTC +8.2%) and Xero (XRO +4.8%). Materials are up 2.75%, with BHP rising 2.8% after Thursday's fall. Gold miners are up 3.03% and uranium stocks have bounced, with Paladin up 7.3%. Pilbara is up 3.2% after approving a $1.9 billion expansion at its Pilgangoora mine. The banks gave back some of Thursday's gain: CBA (-0.7%) and Westpac (-0.8%). Maas Group (MGH) is up 10.6% after confirming $1.7 billion of liquidity and a buyback of up to 20% of its shares. The Australian 10-year bond rate is 5.22% and the Australian dollar is about 69.2 US cents.
Oil is steady. Brent crude was flat at US$105.80 on Thursday night, while US oil (WTI) rose 2.8% after US stockpiles fell by 11.1 million barrels. Energy shares were the best US sector on Wednesday night (+0.8%) and the worst on Thursday night (-1.6%). Another cargo ship sank in the Strait of Hormuz after a strike started a fire on board.
Metals were weak on Wednesday night as the hot US inflation figure weighed: silver fell 6.2%, and uranium and gold miners were hit, with Centrus Energy down 10.7%. Thursday night reversed some of it, with gold miners (GDX) up 4.3% and Centrus up 5.9%. The Australian dollar fell to about 69.2 US cents on Thursday night from 69.8 on Tuesday night.
The money behind AI. The week's lesson is about who owes what. Marcus Today estimates the AI build-out now runs through 47 companies and investors that are each other's shareholders, landlords, suppliers and customers, and US$1.2 trillion of lease commitments sit off balance sheets, more than US$820 billion of it for data centres not yet built. The biggest four cloud companies can afford what they borrow. The strain is further down the chain: Oracle, specialist computing-rental companies like CoreWeave, and project loans whose only real customer is an AI lab still losing money.
Australia owns little of it. The ASX Information Technology sector is down 44% over twelve months, as investors marked down software companies on AI fears, so the ASX 200 has less AI boom to lose. This week the weight sat in the banks and the miners instead. Thursday's jobs figure, which cooled bets on a November Reserve Bank rise, helped the first and Thursday's metals fall hurt the second.
Houthi missiles hit Aramco's executive headquarters in eastern Saudi Arabia on Tuesday, and strikes on shipping in the Strait of Hormuz continued all week. Ukraine said it will resume strikes on Russian oil refineries. China's factory-gate prices rose 5% on the year in September, the fastest since 2022, on dearer oil and AI-related goods, and Chinese exports rose 36% on AI shipments. The International Energy Agency warned global diesel prices are set to rise again.
Friday afternoon 16 October. Federal Reserve chair Warsh speaks in Bangkok. He rarely says much.
Monday 19 October. Warburg Pincus's deadline for Ingenia's board on its $5.25 a share proposal.
Next week. A quiet week for economic data in both countries, with US business activity surveys (PMIs) on Friday 23 October. Netflix, RTX, Meta, Tesla, Lam Research, SAP and Western Digital report.
Wednesday 28 October. The US central bank meets, with a rise priced at about 25% to 30%.
Tuesday 3 November. The Reserve Bank's next decision. The cash rate is 4.60%.