The Nasdaq Composite Index fell 694 points to close at 26,009 on Thursday, a drop of 2.8%, as investors grew skeptical about whether enormous spending on artificial intelligence infrastructure will deliver returns. The broader S&P 500 declined 1.2%, while the Dow Jones Industrial Average rose less than 0.1%.
Wall Street analysts pointed to mounting concerns about the debt load that AI companies are accumulating to finance data center construction and whether those investments will generate the profits investors expect. Adam Crisafulli, head of Vital Knowledge, said in a research note that AI companies are taking on massive capital expenditures to build infrastructure, yet their operating cash flow is not keeping pace. He noted that as credit markets tighten and debt issuance slows, companies may struggle to finance the AI buildout.
The Brookings Institution estimates that developing AI infrastructure will cost more than $10 trillion between 2025 and 2032, making it the largest investment wave in U.S. history, according to Carl Weinberg, chief economist for High Frequency Economics. This would surpass the 19th-century railroad construction boom and the dot-com boom.
Mixed earnings reports compounded the sell-off. Meta Platforms lost 7% after its revenue exceeded analyst expectations but profit fell short, while the company pursues its Muse AI agent. Tesla dropped 3.1% despite reporting stronger-than-expected summer profits, as revenue came in below analyst estimates.
Oil prices also pressured stocks, with concerns about escalations in the war in Iran driving crude higher. West Texas Intermediate, the U.S. benchmark, traded at $99.21 a barrel, up 2.1%, while Brent crude stood around $113 a barrel, up 3.7%.
For investors and savers, the uncertainty about whether AI companies can justify their spending means technology stocks face continued volatility as the market reassesses valuations.