US equities experienced their sharpest decline since July on Wednesday, driven by hotter-than-expected inflation data that disproportionately impacted technology and AI infrastructure sectors. The S&P 500 fell 1.1%, marking its largest one-day drop since July 29, while the Nasdaq Composite declined 1.9%, its biggest single-day loss since July 23. In contrast, the Dow Jones Industrial Average slipped only 0.1%. Major tech decliners included CoreWeave, which dropped 16%, Nebius down 11%, and Oracle falling 9%. Within the broader AI infrastructure space, 21 of the 23 stocks tracked by PRISM’s AI Data Center and Infrastructure Index declined, averaging a 7.46% loss.
Bitcoin miners, many of whom have diversified into AI infrastructure, faced significant selling pressure. TeraWulf shares fell 12.64%, while Core Scientific, Cipher Mining, and IREN declined by 12.44%, 12.35%, and 12.2%, respectively. Other affected companies included Riot Platforms, Bitdeer Technologies, MARA, and CleanSpark. The selloff was triggered by US consumer prices rising 3.7% in September year-over-year, exceeding economists' expectations of 3.6% and remaining well above the Federal Reserve's 2% target. Higher gasoline prices linked to Middle East conflicts were cited as a primary driver of the inflation spike.
The inflation report heightened market expectations for an October Federal Reserve interest-rate hike, with implied probabilities briefly surpassing 50% before retreating. However, San Francisco Fed President Mary Daly stated there was no urgency to act immediately, noting that further hikes might be needed but emphasizing the availability of time to assess limited information.
The synchronized decline across Bitcoin miners and AI infrastructure firms underscores the growing correlation between crypto mining operations and high-growth technology sectors, particularly as miners pivot toward providing compute resources for artificial intelligence. This convergence exposes these entities to dual vulnerabilities: the inherent volatility of cryptocurrency markets and the sensitivity of capital-intensive tech infrastructure to monetary policy shifts. Investors are increasingly treating these stocks as proxies for risk appetite, where rising borrowing costs directly threaten the debt-heavy expansion models common in both industries.
While the immediate trigger was inflation data, the market reaction highlights a fragile sentiment regarding future interest rate trajectories. The brief spike in probability for an October hike suggests traders are pricing in aggressive tightening, despite central bank officials signaling patience. For miners and AI providers relying on leverage, even a delay in rate cuts or a potential hike could significantly compress margins and stall growth initiatives, making macroeconomic indicators more critical than sector-specific fundamentals in the near term.
