AI Stocks Suffer Broad Selloff as IMF Warns Bubble Burst Could Shave 1.3 Points from Global Growth

A significant selloff in AI-related stocks dominated markets this week, triggered by deepening concern over how the AI buildout is being financed amid higher interest rates. Chip stocks were on pace for a combined $1 trillion market-value wipeout, South Korea triggered a circuit breaker amid sharp volatility, and ING's Chris Turner told Reuters markets are likely to remain volatile into year-end.

CoreWeave sat at the center of the rout, with its shares down more than 15% for the week, heading for their biggest weekly decline in roughly two months, while its bonds also sold off sharply. The company has become the focal point of a broader debate over debt-heavy financing of AI infrastructure, as rising borrowing costs put pressure on data-center builders. ARK's Cathie Wood argued CoreWeave will overcome those debt fears on the strength of underlying AI demand, while investors remain divided between those who see rising bond yields as a rally killer and those who believe computing demand will ultimately prove the concerns premature.

The IMF, meeting this week in Asia alongside the World Bank, issued a pointed warning that an AI investment bust, if profits and productivity fail to meet expectations, could reduce global economic growth by up to 1.3 percentage points in 2028. That downside scenario, not the fund's baseline forecast, comes against a backdrop where U.S. AI infrastructure spending could exceed $10 trillion through 2032 and Asian economies are increasingly exposed through AI-driven exports. Financial leaders at the IMF gathering described the global economy as effectively betting heavily on AI, with boom-or-bust scenarios dominating discussions. Fed official Kevin Warsh said the AI boom could boost growth but warned of a bumpy transition, while a separate Fed voice raised questions about whether AI investment is adding to inflation pressures.

Adobe analysts reached their most bearish collective stance on record as AI fears mounted around the company. AMD absorbed what analysts described as a brutal selloff compounded by an $800 million export hit, though major customers continued signing billion-dollar commitments. ServiceNow moved in the opposite direction, trending higher after launching the third generation of its employee-focused AI platform and a new Nvidia-backed AI Passport for governing AI agents. Nvidia CEO Jensen Huang and Broadcom's Hock Tan debated the trajectory of the AI boom at a public event, with Huang reiterating that AI is coming for every company.

On the geopolitical side, China proposed adding advanced AI technologies, including model weights and AI agents, to its export-control list in a move that could restrict overseas transfers and reshape global technology supply chains. Chinese state media simultaneously called for AI innovation to enhance economic growth, reflecting a dual posture of domestic promotion and outbound restriction. In Europe, leaders at an international AI summit in Dublin pushed the case for sovereign and trusted AI, though critics questioned whether strict EU regulation allows the bloc to close the gap with the United States and China. G7 governments and central banks separately agreed to run simulated AI cyberattack exercises to test their readiness for a major incident targeting the banking system.

With Meta Platforms and key semiconductor firms set to report quarterly earnings, investors are increasingly focused on whether massive AI infrastructure spending can demonstrate sustainable returns, a question BofA characterized as the central FAQ hanging over the entire AI buildout.