Nasdaq 100 futures plunge more than 2.5% as concerns mount over returns on AI spending

Key Facts

Futures pointed to a decline of more than 2.5% for the Nasdaq 100 in the upcoming U.S. trading session on October 30, in a sell-off Reuters linked to investor concerns over the cost of building AI infrastructure and the returns it could generate. The signals coincided with Intel shares falling 25% after hours and Amazon shares dropping 6% after the results were announced. Reuters said investors fear that the massive and growing spending on AI will not generate "sufficient returns." The concerns weighed on technology stocks as the scale of spending and its cash flow came under market scrutiny. In Asia, the sell-off hit semiconductor stocks, with declines in the KOSPI and South Korean memory stocks.

Alphabet's decline was among the biggest moves ahead of the drop in U.S. futures: the company's shares fell 12.6% on Wall Street on Thursday, October 29, wiping about $500 billion from its market value, according to Reuters. The agency said cash flow had turned negative because of AI spending, as results from Alphabet, Amazon and Intel were among the factors fueling concern. Fears grew over companies' ability to sustain heavy spending without showing sufficient returns, according to the Reuters report. Amazon shares closed at $243.79 on October 29, according to EL7 data.

In South Korea, the KOSPI fell 206.92 points, or 3.48%, to close at 5,730.74 points on October 30, after reaching a session low of 5,599.42 points, Yonhap reported. The index had opened down about 3%, while the Korea Exchange activated its sell-order suspension mechanism. The mechanism is triggered when the KOSPI 200 futures index falls 5% or more for at least one minute. Yonhap explained that the index's losses did not exceed 5% during the session; the 5% threshold applies to the futures-linked trigger mechanism. The close followed a sell-off in semiconductor stocks and concerns about the sustainability of AI investment.

Shares in South Korea's two memory chipmakers fell despite both reporting strong third-quarter operating results. SK hynix said revenue and operating profit rose 32% and 38%, respectively, from the previous quarter. The contrast between quarterly growth and falling share prices highlights the market's sensitivity to concerns about AI spending and the sustainability of semiconductor demand. Yonhap also attributed the pressure to a series of third-quarter earnings reports that came in weaker than expected, and quoted an analyst at Samsung Securities as saying they had weighed on investor sentiment.

The decline spread to other Asian markets: the MSCI index of emerging Asian shares fell 1.6% on Friday, with the KOSPI down 3.5% and Taiwan's benchmark index down 2.5%, Reuters reported via The Edge Malaysia. A Pepperstone research strategist said investors had not abandoned the AI trade, but had become "more selective about where they invest" and less willing to tolerate earnings disappointments after the rally. On supply, SK hynix forecast that memory shortages would continue through 2030 as investment in AI infrastructure expands. The company said long-term customer agreements cover more than 50% of its production capacity for 2027 and 2028. It also forecast that HBM4 would become its main product in the fourth quarter of 2026, according to its earnings statement.