Nasdaq Falls 2.1 Percent as Tech Sell-Off Caps Its Worst Week Since June

Updated 22:07 UTC

Software stocks fell hard on Friday alongside chips, after investors had treated software earlier in the week as a safer place than chip stocks tied to AI spending. A broad software fund, the iShares Expanded Tech-Software Sector fund, closed down 4.8 percent and lost 7.4 percent for the week, MarketWatch and Investor's Business Daily reported. A semiconductor fund, the iShares Semiconductor fund, closed down 4.1 percent on Friday.

Twilio fell 10.6 percent on Friday, the biggest fall in the S and P 500 that day, MarketWatch reported. Oracle lost 5 percent, ServiceNow lost 4 percent and Salesforce lost 2 percent. For the week, CrowdStrike and Snowflake each lost about 17 percent, and Palo Alto Networks and Cloudflare each lost about 18 percent, Investor's Business Daily reported. Cybersecurity shares were also hit on Friday, with Palo Alto Networks and CrowdStrike each falling more than 7 percent and a broad cybersecurity fund closing down 4 percent, MarketWatch reported.

Wall Street closed lower on Friday, October 16, as a sell-off in technology and AI stocks deepened. The Nasdaq Composite fell 572.99 points, or 2.14 percent, to 26,140.03, The Wall Street Journal and Investor's Business Daily reported. The S and P 500 lost 84.62 points, or 1.09 percent, to 7,659.44. The Dow Jones Industrial Average fell 175.28 points, or 0.34 percent, to 52,002.41, after rising more than 1 percent early in the day.

The Friday fall capped a hard week for tech. The Nasdaq lost about 4.5 percent for the week, its biggest weekly decline since the week ended June 26, and snapped a four week winning streak, Investopedia reported. The S and P 500 closed about 2 percent lower for the week. The Dow still rose about 0.7 percent for the week, helped by banks and other stocks outside tech.

Credit fears hit AI names

The S and P 500 technology sector fell 3 percent on Friday, the biggest fall among its 11 sectors, Investor's Business Daily reported. Shares of CoreWeave fell 12 percent and are down more than 50 percent from their highs earlier this year. The Journal said investors fear AI profits will not arrive soon enough to meet the expensive credit bills building up at CoreWeave and other firms racing to build data centres.

Chip stocks took another hit. Reuters reported at midday that the broader chip index was down 1.8 percent and set for its steepest eight session fall since April 2025, with Micron Technology down 3.9 percent and Advanced Micro Devices down 3.3 percent at that point. Palo Alto Networks fell sharply too, ending the week down 18 percent, Investor's Business Daily reported. Tesla ended 2.1 percent lower and ServiceNow sank more than 4 percent.

Hot inflation keeps the Fed in focus

Two days of hotter than expected inflation data added to the pressure. Consumer and producer price reports this week raised the chance that the Federal Reserve lifts rates again. Speaking at an International Monetary Fund event in Bangkok, Fed Chair Kevin Warsh declined to say whether the central bank would hold or raise rates at its late October meeting or in early December, Investopedia reported.

Traders put the chance of a rate hike at the late October meeting at 17 percent, down from 28 percent a day earlier, while the chance of a December hike stayed at 89 percent, according to CME FedWatch figures cited by Investopedia. The yield on the 10 year Treasury note rose to 5.097 percent, The Wall Street Journal reported.

What held up

Not every part of the market fell. Materials and consumer staples led the gainers in the S and P 500, Investor's Business Daily reported. Cheesecake Factory, Walt Disney and Williams-Sonoma each gained between 2 and 4 percent. Banks had helped limit losses earlier in the day, Reuters reported, as money moved toward lower priced stocks with steady cash flows and away from richly valued AI names.

The week leaves a clear split. Older, cash rich companies held up. Companies spending heavily on AI data centres with borrowed money did not. Next week will test whether buyers step back into tech at lower prices, or whether worries about AI debt and higher rates keep pulling the Nasdaq down.