S&P 500 Falls 1.8% as Returns on AI Spending Face Growing Scrutiny
Key Facts
The S&P 500 fell 1.8% on Oct. 30, its worst daily performance since June, and ended the week lower for a third consecutive week, according to the Associated Press. Technology stocks led the decline as investors shifted their focus from the scale of AI spending to the returns it could generate. The Nasdaq Composite fell 2.9%, while the Dow Jones Industrial Average dropped 572 points, or 1.1%. The moves reflected pressure spreading from major technology companies to the broader indexes. Portfolio manager Joe Tigay said the AI trade was "leaving the hopes-and-dreams phase and entering the show-me phase."
The concerns centered on whether massive AI investments will produce enough earnings and productivity to justify their cost, according to the Associated Press. The report also said high interest rates could slow data-center expansion, an infrastructure buildout that requires substantial capital spending. By the close on Oct. 30, the Nasdaq was down 7.8% from the record closing high it reached on Oct. 6, according to Reuters via Investing.com. The decline added broader context to the sell-off as investors increasingly scrutinized spending and companies' reported results. The issue was not simply growth in demand for AI tools, but companies' ability to turn that demand into profits and cash flow.
Intel was a major focus of the sell-off, with its shares falling 28.6% on Oct. 30, their steepest one-day decline since 1974, according to the Associated Press. The drop came after the company forecast fourth-quarter earnings below analysts' estimates, despite reporting more recent quarterly earnings that beat expectations. The market reaction showed how forward guidance outweighed the completed quarter's results, as investors remained sensitive to signs of future demand and profitability. Amazon shares fell 1.4% after the company reported weaker-than-expected summer earnings. It also said it had spent $94.8 billion on property and equipment, mostly AI investments, and recorded negative free cash flow of $42.4 billion over the previous twelve months.
Pressure extended to Alphabet ahead of the Oct. 30 session; the previous day, its shares fell more than 12%, their worst day ever, according to the Associated Press. The move followed the company's report of a larger cash outflow in the summer than in the spring. These developments kept capital spending and liquidity at the center of the debate over technology companies expanding their AI investments. Across global markets, the MSCI World index fell 1.51% on Oct. 30, while the European Stoxx 600 closed down 0.36%, according to Reuters via Investing.com. Technology's decline was part of a broader session that also saw losses in stock markets outside the United States.
The sell-off coincided with investors moving toward safe-haven assets: U.S. Treasury prices rose, and the 10-year yield was on track for its biggest monthly decline in nearly 3 years, according to Reuters via Investing.com. The report quoted investment analyst Gene Goldman as saying that rising oil prices following additional attacks in the Middle East and concerns about a Binance hack "added to the gloom." In cryptocurrency markets, Bitcoin fell 2.49% to $76,877.30, and Ethereum declined 1.01% to $2,236.76 amid concerns about the hack. This was a separate trajectory from technology-stock losses, as reports documented pressure on digital assets following the incident. Available sources did not link the Ryazan refinery strike on Oct. 15 to the technology sell-off on Oct. 30.
In a security update published on the evening of Oct. 30, Binance said its hot wallets were hacked at around 20:05 UTC on Oct. 29, resulting in an estimated $6.3 billion in token assets lost. It added that an initial investigation pointed to the possible involvement of a compromised laptop before additional points of compromise were uncovered. Blockchain analytics firms suspected that a North Korean hacking group was behind the attack, according to the Associated Press. Binance said it had frozen about $3 billion in on-chain assets as of the update, while deposits and other unaffected services remained operational. The company temporarily halted withdrawals while it handled the incident.
Binance said it would absorb the impact of the stolen funds and had allocated more than $6.34 billion in company funds, including $5 billion in the same affected tokens. The company said its technical team was targeting the start of a phased resumption of withdrawals in about 34 hours, after completing security checks. It also expected preliminary results from its proof-of-reserves snapshot to be ready by Monday, Nov. 2. The Associated Press report said withdrawals were suspended and expected to resume within a day or two, while deposits were unaffected. The developments showed the incident adding pressure to cryptocurrency markets alongside investor concerns about returns on AI spending.