US markets tumble as September inflation hits 3.7 percent and AI shares slide

Wall Street’s three main indices fell on Wednesday after United States consumer prices rose faster than analysts expected, with the Nasdaq taking the deepest hit as leading artificial intelligence stocks sold off.

US consumer price inflation reached 3.7 percent year on year in September, up from 3.4 percent in August, according to the inflation reading reported on the day. The figure was higher than analysts had forecast.

As eNCA reported on 15 October, the Nasdaq lost nearly two percent while the other two major US indices also closed lower.

“Today’s CPI report came in hot, with annual headline inflation reaching its highest level since May,” eToro analyst Bret Kenwell said, according to that report.

Kenwell said traders may reassess the odds of a US Federal Reserve rate hike later in the month.

Angelo Kourkafas of Edward Jones said the inflation reading suggested the Fed’s September interest rate hike was not a one-off, and linked the weakness in AI shares to the rate outlook.

“As we are navigating this higher-for-longer rate environment, we are seeing the realisation that the cost to borrow is moving higher and we know there’s a massive cost of building all the AI Infrastructure,” Kourkafas said.

Data centre operator CoreWeave fell more than 15 percent. Chipmakers Nvidia and AMD also dropped sharply.

The tech selloff had begun a day earlier, when tech firms took heavy losses on concerns about China’s progress in developing AI chips and after Broadcom’s chief executive compared the AI buying frenzy to gambling.

European markets ended higher in London, Paris and Frankfurt. Tokyo and Seoul, both carrying heavy tech weightings, closed lower again. Hong Kong and Shanghai also fell, with investors appearing unmoved by Chinese export data showing a 36.3 percent jump in September, far above expectations.

Dutch chipmaking equipment maker ASML reported record sales and strong profits on demand for AI equipment, and its shares rose 1.7 percent in Amsterdam.

Lufthansa shares fell 2.2 percent after Portugal said the German airline group had been chosen to take a 44.9 percent stake in TAP for 1.03 billion euros as part of the carrier’s reprivatisation.

Bank of America closed down 4.8 percent after US agencies fined the lender $1.2 billion for violating anti-money laundering laws.

For South African readers, the immediate channel is the rand and the JSE rather than Wall Street itself. A higher-for-longer US rate path tends to support the dollar, which pressures emerging market currencies including the rand, and it raises the return investors demand before putting money into riskier markets such as Johannesburg. South African exporters and mining shares are also exposed to how global growth expectations move when US borrowing costs stay elevated.

The US inflation print lands in a domestic setting where South African households are already carrying high food, fuel and electricity costs of their own, and where the Reserve Bank sets the repo rate against a local inflation target rather than the US one. The two inflation stories are separate, and the Fed’s next move does not determine the SARB’s.

What the AI share slide shows is narrower and more specific. The companies being repriced are the ones building and equipping data centres, and the argument being made on the trading floor is about the cost of borrowing against the cost of that construction, not about whether the technology works.