Nasdaq falls 2.9% as concerns grow over AI costs and returns

Key Facts

The Nasdaq Composite closed down 2.9% on Friday, October 30, as a technology sell-off widened amid concerns that the AI investment boom had pushed prices too high, according to the Associated Press. The S&P 500 fell 1.8%, its worst daily performance since June, while the Dow Jones Industrial Average declined 1.1%. Technology stocks came under pressure as investors reacted to Intel’s weak earnings forecast and Amazon’s heavy infrastructure spending. A day earlier, Alphabet shares had plunged after the company disclosed a greater cash outflow in the summer than in the spring. The decline in stocks coincided with a fall in the yield on the 10-year U.S. Treasury, signaling demand for safer assets, according to AP.

Intel shares were among the session’s biggest sources of pressure, falling about 29% in their worst day since 1974. AP said the drop came after the company forecast fourth-quarter earnings below analysts’ expectations. Across the broader chip sector, Nvidia fell 5.3% and AMD dropped 12.1%, while the semiconductor index lost 8.7%, according to Reuters via MarketScreener. Pressure spread to companies involved in building AI data centers, amid concern that high interest rates could slow their expansion. That has put investors’ bets on growth in demand for chips and infrastructure under scrutiny over financing costs and how quickly returns will materialize.

Amazon fell 1.9% after reporting weaker-than-expected summer earnings, according to AP. The company disclosed that it spent $94.8 billion on property and equipment, most of it on investments in AI technologies. The figures come as major companies raise their capital-spending forecasts in a race to expand AI infrastructure; those companies include Meta, Alphabet and Amazon, according to a Reuters report via MarketScreener. Morgan Stanley estimated that spending on AI infrastructure would exceed $1 trillion in 2027. The previous day, Alphabet shares fell more than 12%, their worst daily performance ever, after the company said it had used more cash in the summer than in the spring.

Portfolio manager Joe Teigai described a shift in investors’ benchmark for the sector, saying, "We’re moving from a phase of hopes and dreams in AI trading to a phase of show us the results." Against the backdrop of announced spending and falling shares, that benchmark reflects the market’s focus on companies’ ability to deliver returns commensurate with their investments. Earnings-season data, however, painted a broader picture than the companies that drove the sell-off: 299 S&P 500 companies had reported third-quarter results through October 30, and 82% beat consensus estimates, according to LSEG data cited by Reuters via MarketScreener. The technology-heavy Nasdaq was more than 8% below its record closing high, set on October 6. Reuters estimated that the Nasdaq 100’s market capitalization was on track to lose more than $2 trillion in October.

The yield on the 10-year U.S. Treasury fell to 4.93% on Friday from 4.98% at Thursday’s close, according to AP. The agency linked the move to demand for safer assets during the sell-off. While the source did not specify a date for the next economic data release, Apple was scheduled to report results the following week, while Nvidia was expected to report in mid-November, according to Reuters via MarketScreener. In the broader political context, the U.S. midterm elections are scheduled for November 2026, according to USAGov. All 435 seats in the House of Representatives are up for election in every midterm and presidential election.