Nasdaq Falls 2.6 Percent as AI Spending Fears Hit Tech Stocks

The Nasdaq Composite fell 694.00 points, or 2.60 percent, to close at 26,008.86 on Thursday, October 22, its steepest daily fall since June. The S&P 500 dropped 93.74 points, or 1.21 percent, to 7,663.43, its worst session since July. The Dow Jones Industrial Average ended little changed, up 11.89 points, or 0.02 percent, at 52,867.98. The split showed a selloff aimed squarely at technology and growth stocks, not at the whole market.

Meta and chip stocks lead the fall

Meta Platforms fell 6.98 percent to $648.85 after its third quarter results. Revenue of $64.60 billion beat the $63.37 billion forecast, but earnings per share of $3.83 missed the $6.54 estimate. The company said earnings would have been $7.40 a share without a $9.9 billion legal settlement with multiple states over child addiction claims. Investors focused instead on spending: Meta put its future lease and contract commitments at about $825 billion, up from about $700 billion in July, much of it tied to AI computing and infrastructure.

Chip stocks took the heaviest hit. The Philadelphia Semiconductor Index fell 6.72 percent to 10,731.98, its lowest level since July 29, and all 30 of its stocks closed lower. AMD fell about 8 percent, Micron about 6 percent and Nvidia about 4 percent. Lam Research dropped about 10 percent after management said near term supply limits held back its December quarter outlook. AI cloud name CoreWeave fell about 10 percent.

Tesla, jobs and the wider market

Tesla beat forecasts on revenue of $28.05 billion, against $27.9 billion expected, and adjusted earnings of 48 cents a share, against 43 cents expected. The company also cut its annual capital spending forecast, a move that raised fresh questions about the pace of its AI and robotics plans. In Canada, the S&P/TSX Composite fell 0.97 percent to 35,973.45. New U.S. jobless claims fell 6,000 to 194,000 in the week ended October 17, a three month low, and the Conference Board said its leading economic index was unchanged in September.

Oil rises while yields fall

Oil moved the other way. Brent crude rose 2.10 percent to settle at $112.99 a barrel, near a five month high, after more Houthi attacks in Saudi Arabia raised supply fears. U.S. crude rose 0.78 percent to $99.29. Investors bought Treasuries as stocks fell: the 10 year yield dropped about 19 basis points to 4.953 percent, and the VIX volatility index rose 14.39 percent to 19.08. Gold fell 1.65 percent to $4,039.40 an ounce, silver fell 3.18 percent and copper fell 1.27 percent. Bitcoin fell 3.31 percent to $81,243.90, and ether also lost more than 3 percent.

Friday brings flash purchasing manager readings and consumer sentiment data, along with earnings from several energy companies, the next test of whether the selloff spreads or settles.