Nasdaq-100 Faces Loss of More Than $2 Trillion as AI Spending Fears Mount
Key Facts
The Nasdaq-100 was at risk of shedding more than $2 trillion in market value during October, as futures fell more than 2% on October 30. Reuters, via MarketScreener, linked the move to mounting investor concerns over artificial intelligence spending, while a Reuters report via Kitco said Amazon’s plans to keep spending heavily and Intel’s warning about cash burn deepened concerns over infrastructure costs and when returns would emerge. Amazon shares fell 6.3% in premarket trading, while Intel shares dropped more than 25%. One strategist said the move appeared to be a shift from a highly popular technology trade to safer havens. He added: "I don't think this is a broader correction... but a shift from a highly popular technology trade to safer havens."
Pressure on Amazon came after the company posted a free cash flow outflow of $42.4 billion in the 12 months ended September 30, 2026, compared with an inflow of $14.8 billion in the corresponding period ended September 30, 2025. The company attributed this mainly to higher purchases of property and equipment tied to AI investments, which increased by $94.8 billion year over year. At the same time, its results showed operating growth: net sales rose 12% to $201.9 billion in the third quarter, and sales in its cloud computing business increased 39% to $46 billion. Reuters reported that Amazon was expected to announce another increase in capital expenditures next year. The divergence between sales growth, rising spending and cash flow was central to investors’ concerns about when returns on investments would arrive.
Intel, meanwhile, warned that it would burn cash this year, citing weakness in the personal computer market, manufacturing bottlenecks and heavy spending to expand production. Its shares fell more than 25% after the warning, adding to the broader debate over the cost of expanding production capacity to meet AI demand. Amazon, Google, Microsoft and Meta together spent more than $200 billion in the third quarter alone, according to Reuters. One analyst said higher financing costs could leave companies with less cash to expand and repay debt. As a result, the market’s focus extended beyond growth in cloud computing businesses to the scale of financing required before investments generate returns.
The retreat spread to major indexes during trading on October 30: the Nasdaq Composite fell 2.3% as of 11:06 a.m. Eastern time, and the S&P 500 declined 1.4%, according to the Associated Press. For the month, the Nasdaq was on track to end October with a loss, breaking a two-month winning streak. By contrast, the S&P 500 and Dow Jones indexes remained on track for monthly gains. Nine of the S&P 500’s 11 sectors were headed for monthly gains, with communication services and technology the exceptions. Communication services was on track for its worst month since April 2022.
Technology companies’ concerns came amid data showing stronger U.S. economic growth in the third quarter. Real gross domestic product rose at an annual rate of 3.4% from July to September 2026, compared with 2.2% in the second quarter, according to the U.S. Bureau of Economic Analysis. Investment, consumer spending and government spending contributed to the increase, partly offset by a decline in exports. Final sales to private domestic purchasers rose at an annual rate of 4.9% in the third quarter, after increasing 4.6% in the previous quarter. The figures put the slowdown in technology stocks against an economy that expanded at a faster pace, while market concerns centered on capital spending and when it would pay off.
The Federal Reserve had kept its target interest rate range at 3.75% to 4% on October 28, in a decision approved by a 10-to-2 vote. The two dissenting members favored raising the range by a quarter of a percentage point. The central bank’s statement described economic activity as expanding at a solid pace and noted that inflation remained elevated and capital investment was strong. The Bureau of Economic Analysis will release its second estimate of U.S. GDP for the third quarter on November 25, 2026. In the market, investors were watching how major companies would balance expanding AI investments with the cash available to fund them.