Nasdaq 100 futures fall 2.6% as concerns grow over returns on AI spending

Key Facts

Nasdaq 100 futures fell 2.6% before Wall Street opened on October 30, alongside a 1.12% decline in S&P 500 futures, after results from Amazon and Intel heightened investor concerns about the scale of artificial intelligence spending and its ability to generate sufficient returns. Trading data at 08:15 a.m. Eastern Time showed losses widening in futures tied to technology stocks. In Asia, South Korea’s Kospi fell 3.5% during Friday’s session, as the technology-heavy market was affected by those concerns. At 10:00 a.m. Eastern Time, the Nasdaq Composite was down 2%, the S&P 500 had fallen 1.1%, and the Dow Jones was down 0.3%, or 176 points. The moves came as investors questioned whether massive spending on AI infrastructure would deliver an adequate return to shareholders.

Corporate results added to that concern. Amazon shares fell 6.5% in premarket trading after the company reported a large cash outflow in the third quarter and signaled another increase in capital spending over the following year. Intel shares dropped more than 25% after the company warned of cash burn this year. Intel attributed the pressure to weakness in the personal computer market, manufacturing bottlenecks and heavy spending to expand production. If sustained, losses in the two stocks threatened to erase about $300 billion from their combined market value, while the Nasdaq-100 was poised to lose about another trillion dollars. The index had shed nearly $1.4 trillion in market value during the month up to that point.

Concerns about spending spread to major technology companies after Alphabet shares fell 12.6% on Thursday, wiping $500 billion from its market value. The decline came as the company’s AI spending turned into negative cash flow. The Associated Press said Alphabet’s purchases of property and equipment exceeded $51 billion in the quarter ended in September. Higher borrowing costs are adding pressure on companies financing data center construction and purchases of more chips. An analyst at Pepperstone said investors were increasingly asking whether shareholders would receive “an adequate return on the massive capital being deployed.”

An analyst at B. Riley Wealth said disappointment in Alphabet, Amazon and Intel shares could be met with a sharp market penalty, but described the move as a shift from the popular technology trade to safer havens. Nvidia shares fell 2.7%, making them the biggest drag on the S&P 500 and outweighing Intel’s impact on the index. Meanwhile, yields on 10-year U.S. Treasuries fell about 8 basis points to 4.91% on Friday, heading for their biggest monthly decline since December 2023. The drop in yields reflects investors’ shift toward bonds amid the stock selloff. The analyst said: “I don’t think this is a broader correction... It’s more of an exit from a very popular technology trade and a move into safer havens.”

Crypto assets came under pressure alongside technology stocks. Bitcoin fell to a six-week low before paring losses, trading down 1.7% at $77,471 on October 30. The cryptocurrency had approached $77,000 after topping $86,000 earlier in the month, according to AP. Coinbase shares also fell 10.8% despite the company reporting quarterly results that beat analysts’ expectations. Sector concerns deepened after a security incident that Binance said had an estimated total impact of about $6.3 billion, with about $3 billion in on-chain assets frozen as of the company’s October 30 update. Binance said its initial investigation indicated that a DevOps engineer’s laptop may have been compromised, allowing the attacker to access a service container and send unauthorized withdrawal transactions, but said it had found no evidence that private wallet keys had leaked.

Binance said it would cover the losses from its SAFU fund and company funds, and affirmed that user funds were safe, while deposits and withdrawals were temporarily suspended during security checks, according to its initial update. The company estimated the incident’s total impact at about $6.3 billion, while AP said the attack affected assets worth more than $6 billion; these remain estimates tied to the initial investigation. In markets, an analyst at Arbuthnot Latham said a potential public listing by Anthropic would be an important test of investor sentiment toward AI companies. He added that a weak listing could signal continued weakness. He said: “The next major milestone will be Anthropic’s listing, to see how it is received. If the listing is weak, I think that could signal some weakness ahead.”