Nasdaq Falls 3.4% as Concerns Grow Over Returns on AI Spending
Key Facts
U.S. stocks fell in a market update at 2:15 p.m. Eastern time on Oct. 30, with the Nasdaq down 3.4% and the S&P 500 down 2.2%, while the Dow fell 634 points, or 1.2%, according to the Associated Press. The decline came amid a deepening selloff in technology shares, after investors’ enthusiasm for artificial intelligence raised concerns that prices had climbed beyond what the outlook justified. The Nasdaq opened at its lowest level in more than two months, according to Reuters, with concerns focused on the cost of AI infrastructure and how long it would take to turn spending into returns. A comparison of the open with the later update shows the selloff widened during the session: the Dow had risen 41.3 points to 52,383.9 at the open, while the S&P 500 fell 1.16% and the Nasdaq 2.26%. At the close, the Dow stood at 51,996.92, compared with 52,342.56 in the previous session.
Chip stocks accounted for part of the pressure, with Intel shares tumbling 30.9% after the company’s profit forecast for the final three months of the year fell short of analysts’ expectations, even as its latest quarterly earnings topped estimates. Nvidia shares fell 5.3% and were the biggest drag on the S&P 500, outweighing Intel’s decline, according to the AP. The moves highlight investors’ sensitivity to companies’ forecasts for AI-related spending and the profits it may generate. Alphabet also fell in the previous session after weaker-than-expected summer growth, recording its worst decline ever, according to the AP, reviving concerns about returns on AI investments. On Oct. 29, the Dow fell 132.54 points, or 0.3%, to 52,342.56, while the Nasdaq dropped 1.4%.
Questions about the cost of investment extended to Amazon, whose shares fell 2.1% after it reported weaker-than-expected summer earnings. The company said it had used 42.4 billion dollars in free cash flow over the previous twelve months and spent 94.8 billion dollars on property and equipment, mainly on AI technology investments. These figures put capital spending and liquidity at the center of the market’s assessment of technology companies, alongside concerns about how long new infrastructure will take to generate returns. According to the AP, broader concerns centered on the possibility that Wall Street’s enthusiasm for AI had pushed stock prices to elevated levels. The moves coincided with a broad decline in technology shares, while the Nasdaq posted the biggest drop among major indexes in the market update.
In the bond market, the yield on the 10-year U.S. Treasury fell to 4.92% from 4.98% at the end of Thursday, while Brent crude rose 2.4% to 113.50 dollars a barrel, according to the AP. The moves came on a day marked by stock selling and lower yields, alongside a rise in oil. On Oct. 28, the Federal Reserve kept its target range for the federal funds rate at 3.75% to 4%, with the decision passing by a 10-to-2 vote. Board members Lisa D. Cook and Beth M. Hammack preferred a quarter-percentage-point increase. The Fed said economic activity was expanding at a solid pace and inflation remained elevated, a monetary backdrop that remained in view as stock losses focused on concerns about technology and spending.
The reading points to a monthly slowdown in activity, not a contraction under the index’s measure. Upcoming dates also include the U.S. October jobs report, scheduled for release on Nov. 6 at 8:30 a.m. Eastern time. The Federal Reserve will release minutes from its Oct. 27 and 28 meeting on Nov. 18 at 2:00 p.m. Eastern time.