Artificial intelligence-linked stocks fell sharply as traders reduced risk ahead of Federal Reserve Chair Kevin Warsh’s scheduled remarks at the Jackson Hole symposium on Friday, with Nvidia extending a seven-session decline and memory-chip shares joining the selloff. The move came despite fresh signs of spending on AI infrastructure, underscoring how concerns over interest rates and funding costs are outweighing near-term demand signals across the sector.
Nvidia closed 3% lower, its seventh consecutive daily loss, even as the price of servers equipped with the company’s AI chips reportedly increased by more than 15%. The combination suggests that higher prices for AI hardware have yet to reassure equity markets that the industry’s heavy infrastructure spending will translate into durable earnings growth.
Memory-chip manufacturers, whose products are central to AI servers and data centers, faced even steeper declines. SanDisk fell 6.45%, Micron lost 5.83%, and SK Hynix dropped 5%. Their shares have become closely tied to expectations for spending on high-bandwidth memory and other components needed to train and run large AI models.
Alibaba’s $10.2 billion AI funding plan fails to lift shares
Alibaba also came under pressure after announcing plans to raise 80 billion Hong Kong dollars, or about $10.2 billion, through a Hong Kong share placement. The company said the proceeds would support AI infrastructure, placing it among the largest companies seeking substantial new capital for data centers, computing capacity, and related technology.
Alibaba’s Hong Kong-listed shares fell 10% after the announcement. A share placement expands the number of outstanding shares, which can dilute existing holders, while the size of the deal also drew attention to the scale of funding required for the company’s AI plans.
The transaction is Alibaba’s first equity placement since its 2019 Hong Kong listing. Chairman Joe Tsai and Chief Executive Eddie Wu subsequently bought a combined 120 million Hong Kong dollars of Alibaba stock after the decline, a move that signals management’s willingness to purchase shares at lower prices but did not reverse the initial market reaction.
The company’s capital raise illustrates a difficult balance confronting major technology groups. AI services may create new sources of revenue, but the systems behind them require expensive processors, memory, networking equipment, electricity, and physical data-center capacity. Companies able to fund that buildout internally may have more flexibility than those relying on new debt or equity financing.
Treasury yields remain elevated despite cash-management discussion
Attention in U.S. markets also remained fixed on government financing and the direction of longer-term Treasury yields. The Treasury indicated it could use funds in the Treasury General Account, its main operating cash account, to buy longer-dated Treasuries in an effort to restrain yields.
The Treasury General Account was described as holding close to $1 trillion, with the balance cited at $933.22 billion. The U.S. national debt had also passed $40 trillion in late August, increasing scrutiny of the government’s borrowing needs and the amount of Treasury debt markets must absorb.
Longer-dated yields did not remain lower after the discussion. The 30-year Treasury yield briefly dipped but was trading around 5.246%, leaving financing conditions restrictive for companies whose valuations depend heavily on earnings expected years into the future.
High yields can pressure AI-linked shares through several channels. They raise the cost of borrowing for data-center construction and make future profits less valuable when discounted back to the present. They can also encourage traders to shift toward assets with more immediate income, including government bonds, rather than companies priced for rapid expansion.
Claims that Treasury cash operations would automatically inject new money into local banks or operate as a hidden stimulus program go beyond the information available. The Treasury General Account is a government cash-management tool, and changes in its balance can affect bank reserves and market liquidity, but the effects depend on how funds are raised, spent, and settled through the financial system.
Warsh faces a closely watched Jackson Hole appearance
Warsh’s speech is expected to be a major policy event since he took office in May. Traders will be looking for his assessment of inflation, which remains above the Federal Reserve’s 2% target, and for any indication of how the central bank views the interaction between monetary policy, persistent fiscal borrowing, and elevated long-term yields.
The market’s focus is unlikely to rest solely on whether Warsh signals a rate cut. A half-percentage-point reduction, as suggested by some market commentary, would be a major policy step and cannot be assumed from the current backdrop. The Fed’s decisions are guided by inflation, employment, economic activity, and financial conditions rather than the performance of technology stocks or digital assets.
Cryptocurrency markets may also react to the speech because Bitcoin and other digital assets often trade alongside broader shifts in liquidity expectations and risk appetite. Yet a direct link between Treasury cash management, bank reserves, and a near-term rise in token prices is uncertain. Traders using leverage face heightened risks when bond yields, technology shares, and crypto assets are all responding to the same macroeconomic catalyst.
With Nvidia, memory stocks, and Alibaba already under pressure, Friday’s remarks could determine whether the latest selloff remains a short-term reassessment of rate expectations or develops into a deeper challenge to the market’s confidence in the AI spending cycle.
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