Key Highlights

● BofA analysts said deployed AI infrastructure is running at close to full utilization.

● They argued the risk facing chip stocks is priced in.

● The PHLX Semiconductor Index fell to 11,137.29 with all 30 members lower.

● Selling targeted how AI is financed, with CoreWeave's debt above $50 billion in focus.

The argument

Bank of America's semiconductor team pushed back against the gloom engulfing chip stocks. According to market reports, the analysts said deployed AI infrastructure is running at close to full utilization, and that the risk facing the group is "priced in."

The point matters because one of the central fears in the AI trade is overbuilding: the worry that data centers packed with expensive processors could sit idle if demand falls short of the spending. A utilization rate near full capacity suggests that the chips already shipped are being put to work, which is the kind of evidence bulls point to when arguing that spending reflects real demand.

A market not yet convinced

Friday's trading showed investors were not ready to embrace that view. The PHLX Semiconductor Index fell to 11,137.29, with all 30 of its members lower. Several reports said the index extended an eighth straight decline, though accounts differed on how long the streak was and how it compared historically.

Advanced Micro Devices (NASDAQ:AMD) sank, Broadcom (NASDAQ:AVGO) fell, and Arm Holdings (NASDAQ:ARM) and Marvell Technology (NASDAQ:MRVL) declined. Micron Technology (NASDAQ:MU) slid amid concerns about Chinese competition, specifically CXMT's progress in advanced DRAM. Seagate Technology (NASDAQ:STX) and Western Digital (NASDAQ:WDC) tumbled as well. KLA (NASDAQ:KLAC) also fell.

Nvidia (NASDAQ:NVDA) wobbled. Reports on its direction were mixed, with one showing a decline at midday and another describing a gain. Earlier in the week, Nvidia CEO Jensen Huang said AI chip orders keep growing.

Financing, not demand

Much of the selling targeted how AI is paid for rather than whether it is used. Market commentary said the rotation erased more than $1 trillion from semiconductor and AI-related stocks over the week. CoreWeave (NASDAQ:CRWV), a large buyer of Nvidia chips, plunged amid attention on its debt load of more than $50 billion. BofA's senior software analyst kept a Buy rating on CoreWeave with a $140 price target, according to the reports.

That analyst described the mood bluntly: "First of all, this is more sentiment driven. This is not about fundamentals." One market commentator offered a different lens, saying, "The AI group is now splitting between companies that can fund the buildout themselves and those that have to borrow."

Goldman Sachs published a note describing hedge funds selling AI names, which was characterized as a "tactical rotation" away from smaller AI companies.

The broader tape

The Nasdaq Composite sank 572.99 points to 26,140.03, its worst week since the week ended June 26. The S&P 500 fell 84.62 points to 7,659.44, while the Dow Jones Industrial Average slipped 175.28 points to 52,002.41. Energy, utilities and staples gained as investors rotated toward defensive sectors.

TSMC (NYSE:TSM) added to the debate earlier in the week, reporting third-quarter revenue of $46.72 billion, above its guidance, and keeping 2026 capital spending at $60 billion to $64 billion, according to market reports.

Utilization Claim Faces Lam and TI

The Federal Reserve's decision on Oct 28 will also shape the backdrop for long-duration growth stocks. The utilization argument faces its next test in earnings. Lam Research (NASDAQ:LRCX) and Texas Instruments (NASDAQ:TXN) report Oct 21, alongside Meta (NASDAQ:META) and Tesla (NASDAQ:TSLA). Western Digital reports Oct 22, and Intel (NASDAQ:INTC) reports Oct 29.