The AI Trade Met the Credit Market

Brad Roth
October 18, 2026

TL;DR

• The Nasdaq 100 lost 5.49% on the week and chip stocks 10.5%. The Dow gained 0.67%, and the equal-weight S&P 500 rose 0.49%.

• Inflation ran hot and the ten-year still fell 14.6 basis points to 5.098%. Investors sold AI borrowers and bought Treasuries.

• Healthcare gained 3.45% and grew to 21.0% of the even-weight strategy. The Dow is the index strategy's largest piece at 34.0%.

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Week in Review

Weekly closes, Friday 10/16/26

• The S&P 500 closed at 7,659.44, down 1.95% on the week.

• The Dow ended at 52,002.41, up 0.67%.

• The Nasdaq Composite finished at 26,140.03, down 4.48%.

• The Russell 2000 closed at 2,721.37, down 3.05%.

• The VIX ended at 19.99 against 14.84 a week ago.

The week turned on AI debt. CoreWeave fell 15.5% Wednesday and 12% Friday. The cost of insuring its debt against default passed 1,100 basis points, per Reuters. Oracle's protection traded near 300 basis points. Chip stocks fell 10.5% on the week. Technology lost 7.70%, the worst of eleven sectors by almost seven points.

Seven sectors rose. Consumer staples led at 5.02%, then energy at 4.86% and healthcare at 3.45%. Financials added 1.44% through a mixed run of bank results. Goldman beat on equities trading. JPMorgan missed, and Bank of America took a $1.2 billion penalty.

Inflation ran hot. September CPI rose 3.7% from a year ago, and core rose 0.3% for the month. Producer prices jumped 1.3% in September. Bonds rallied anyway. The ten-year closed at 5.098%, down 14.6 basis points, after touching 5.33% Wednesday. The two-year fell 5.5 basis points to 4.736%. Futures put the odds of an October 28 hike at 17% Friday, per CME FedWatch.

Oil kept climbing. Brent closed at $109.86, up 4.9%, and touched $110 for the first time since May. West Texas settled at $101.41. Gold slipped 0.83% to $4,181.10, and bitcoin ended near $82,000.

Allocation Changes

Both systematic strategies kept the same lineup. Same three indexes, same three sectors, same bills. The weights moved with prices.

The index strategy holds the Dow at 34.0%, the S&P 500 at 33.4% and the Nasdaq 100 at 32.8%. A week ago the Nasdaq 100 was the largest piece at 33.9%. Now the Dow is.

The even-weight strategy holds healthcare at 21.0%, financials at 20.4% and technology at 18.9%, with 40.3% in Treasury bills. Healthcare grew from 20.1% and technology slipped from 20.4%. The three-month bill yields 4.173%.

The actively managed strategy didn't add or drop a position. The broad commodity fund grew to 15.4% from 14.8%, and the direct energy fund to 7.3% from 6.8%. The leveraged Nasdaq 100 position eased to 7.6% from 8.9%.

The Bigger Picture

This selloff came from the credit market. Investors didn't just question AI demand this week. They questioned who pays for the data centers. CoreWeave carries more than $51 billion of debt and obligations, per CNBC. Default insurance on a major AI borrower now prices like distressed debt. Lenders start asking the same question of everyone in the chain. That's why a hot CPI couldn't keep yields up. Money left AI stocks and AI bonds for Treasuries.

The index strategy owns all three major indexes in even thirds. That split did real work this week. The Nasdaq 100 lost 5.49% and the Dow gained 0.67%. That's a six-point gap in five sessions. The Dow sizes stocks by share price, and banks, insurers and drug companies carry a big say in it. Fixed thirds let the winner grow. The Dow moved from the smallest piece to the largest.

The even-weight strategy shows the same thing one sector down. Technology is the biggest sector in the regular S&P 500, about a third of it. Here it's 18.9%, the smallest of three. Healthcare gained 3.45% and is now the largest at 21.0%. UnitedHealth raised its 2026 forecast Tuesday. Drug and insurance demand doesn't run on data center budgets. Financials, at 20.4%, rose 1.44% on solid regional bank results. The other 40.3% sits in bills yielding 4.17%, and that yield rises if the Fed hikes.

THOR Risk Gauge

Neutral. The index strategy is fully invested, and the even-weight strategy holds 60.3% in three sectors with 40.3% in bills. Falling yields help, and so does an equal-weight market that finished up. A VIX near 20, Brent near $110 and hot inflation keep it centered.

Signal Watch

THOR Index Rotation — As of 10/16/26

Fully invested in near-equal thirds. The Dow beat the Nasdaq 100 by six points this week, and it's now the largest of the three on price alone.

THOR Low Volatility — As of 10/16/26

Healthcare moved to the top on a 3.45% week. Even sizing kept the market's worst sector under a fifth of the portfolio, and bills cover the other 40%.

THOR AdaptiveRisk Dynamic — As of 10/16/26

The mix runs 44.9% equity, 18.8% alternatives, 15.4% commodity, 14.7% specialty currency and 6.2% fixed income. Commodities, the energy fund and Exxon add up to 26% of the portfolio, its direct line to Brent near $110. A market-neutral fund that gains when low-volatility stocks beat high-flyers grew to 3.2%.

Weekend Reading

Behind the Ticker — The $7 Trillion Market Most Advisors Can't Actually Access, with Chris Getter of Simplify. Getter started in high yield at Fidelity and spent a decade at PIMCO. He's now a managing director and portfolio manager at Simplify. He explains why most investors only own currencies by accident. Then he walks through a dollar-neutral carry strategy built to survive the sudden unwind.

Explainer: Why are credit default swaps unnerving AI investors? (Reuters, October 15). Amanda Cooper on the market behind this week's selloff. CoreWeave's default insurance implies about a 63% chance of default over five years, up from about 30% a year ago.

Consumer prices rose 3.7% annually in September as gas prices skyrocket (CNBC, October 14). Jeff Cox on the report bonds ignored. Gasoline rose 9.1% for the month and drove about half the headline gain.

Oil touches $110 on continued uncertainty over Middle East supplies (The National, October 16). Alvin R Cabral on Friday's move. The IEA agreed to release more than 20 million barrels, and Brent still touched $110.

Quote of the Week

"In the end, trees don't grow to the sky, and few things go to zero. Rather, most phenomena turn out to be cyclical."

— Howard Marks, Oaktree Capital memo, "You Can't Predict. You Can Prepare.," November 2001

Brad Roth / CIO, THOR Financial Technologies

This content reflects the opinions, analyses, and research of THOR Financial Technologies as of the date published. It is provided for informational and educational purposes only and does not constitute investment advice and should not be relied upon as the basis for any investment decision. Past performance doesn't guarantee future results, and all investments involve risk. For more information, please go to: thorft.com