The Nasdaq Composite plunged more than 700 points Friday, ending October on a turbulent note as investors increasingly questioned the strength of the technology sector.
The selloff followed a string of disappointing earnings reports from prominent tech companies. Intel shares suffered their steepest one-day decline since 1974, dropping nearly 29%. Alphabet, Google’s parent company, remained under pressure after plunging 12% Thursday—a decline that wiped out approximately $500 billion in market value.
Nvidia, a leading supplier of advanced processors used to run artificial intelligence systems and a key indicator of broader tech sentiment, dropped 4.2%.
“This has been one of the worst tech earnings seasons in memory, with underwhelming results from a slew of very prominent companies,” Adam Crisafulli, head of Vital Knowledge, wrote in a research note.
He said the deterioration in technology stocks and investor confidence could extend beyond financial markets, potentially weakening the sector’s fundamentals by making it harder for companies to secure additional debt or raise equity.
The tech-driven decline also pulled down the broader market. The S&P 500 fell 140 points, or 1.8%, while the blue-chip Dow Jones Industrial Average shed 572 points, a drop of 1.1%.
Debt reckoning?
Underwhelming technology earnings have intensified concerns that the enormous sums being poured into artificial intelligence may not deliver the returns Wall Street anticipates. Investors are also scrutinizing the borrowing used to fund data-center construction and questioning whether companies can manage those obligations over time.
“Mega-cap stocks have faced increased selling pressure over the past two weeks as elevated AI-related spending and rising financing costs raise concerns over the path to profitability,” Adam Turnquist, chief cross-asset strategist at LPL Financial, said in an email. He added that recent earnings reports have fueled those worries by pointing to slower growth in the core businesses of some major cloud and technology companies.
Technology shares are also being pressured by expectations that the Federal Reserve may need to raise interest rates again to cool economic activity and bring down inflation, which remains above the central bank’s target.
The Fed kept its benchmark rate unchanged this week, but many economists expect policymakers to resume raising rates as soon as December and continue doing so into 2027. Higher borrowing costs would make it more expensive to build the data centers needed to support AI services, putting further pressure on corporate profits.
Investors have relied heavily on the rapid expansion of artificial intelligence to sustain the stock market’s record-setting run. That confidence is now facing a serious test. In a report released earlier this week, Ulrike Hoffmann-Burchardi, UBS’ chief investment officer for the Americas and global head of equities, urged clients to “diversify beyond AI.”
“While we maintain a constructive outlook on the structural growth of the AI theme, high expectations and potentially wide differences in company outcomes underscore the risks of single-stock concentration,” she said. “We think investors should ensure their equity portfolios are broadly diversified.”
Even after Friday’s selloff, U.S. stocks remained just 3.4% below their record high, helping preserve much of the recent gains in workers’ 401(k) retirement accounts.
Cryptocurrency markets also retreated after hackers believed to have links to North Korea stole more than $6 billion from Binance, the world’s biggest crypto exchange. Bitcoin fell toward $77,000, down from above $86,000 earlier this month.
