On Tuesday, tensions between the U.S. and Iran sent shares of chip and artificial intelligence-related companies lower, dragging down broader markets. The Nasdaq Composite, heavily weighted toward technology stocks, fell nearly 1.15%, while the S&P 500 dropped about 0.55% and the blue-chip Dow Jones Industrial Average declined roughly 0.15%. The Philadelphia Semiconductor Index plunged around 5.45%, marking its steepest decline since July 29.
An Iranian senior official told Reuters that Iran would shift to a “full-scale offensive” military posture amid stalled negotiations with the U.S. aimed at permanently ending hostilities.
Dim prospects for a U.S.-Iran peace deal have kept oil prices elevated and government bond yields near multi-year highs. Over recent months, memory and other semiconductor stocks have experienced sharp volatility. Initially surging due to rising demand driven by AI infrastructure development, these stocks later faced steep declines amid profit-taking, investor over-optimism, growing concerns over financing for AI infrastructure projects, and pressure on returns.
Shares of AI chipmaker NVIDIA (NVDA) fell about 2% after the company committed to providing over $100 billion in credit support to back OpenAI’s (OPENAI) new large-scale data center campus in Ohio.
Developed, owned, and operated by SB Energy, a subsidiary of SoftBank Group (SFTBY), the project has secured a 20-year lease agreement with OpenAI as its primary tenant. NVIDIA will also make a direct equity investment of $1.5 billion in SB Energy. Wedbush commented on OpenAI’s guaranteed funding, while GF Securities raised its price target on NVIDIA from $308 to $345 ahead of the company’s second-quarter earnings release on August 26. Meanwhile, Bank of America noted that NVIDIA offered investors an “extremely attractive valuation.”
However, caution in credit markets toward NVIDIA (NVDA) is mounting, as the company’s credit default swap (CDS) spreads have widened from their recent peak in late July.
NVIDIA’s CDS bid-ask spread has climbed to 80.77, surpassing the previous high recorded on July 29—the same day the tech giant’s stock hit a notable low point. CDSs function essentially as insurance against corporate financial distress, meaning wider spreads typically reflect increased risk expectations among credit traders.
This comes amid growing concerns about the sustainability of so-called circular financing and massive balance sheet commitments tied to AI infrastructure development. Earlier on Tuesday, reports emerged that NVIDIA (NVDA) had agreed to provide over $100 billion in credit backing for OpenAI’s (OPENAI) new data center complex in Pike County, Ohio.
These developments come just weeks before NVIDIA (NVDA) releases its highly anticipated quarterly earnings report, with rising unease now surfacing in credit markets.
