A broad selloff of technology stocks wiped nearly $1 trillion in value from the Nasdaq exchange over one week and erased about $2 trillion in a month, as investors questioned whether the billions being poured into artificial intelligence could generate returns quickly enough. On Friday alone, the S&P 500, which tracks the 500 most valuable US companies, fell by more than 1%, losing hundreds of billions in market value. The Nasdaq composite declined more than 3%, while the Dow Jones Industrial Average fell less steeply.
The technology-led decline was particularly severe, with more than $2 trillion in market value set to be wiped from the Nasdaq 100 this month. The Nasdaq 100 has fallen more than 5.8% so far in October as the artificial intelligence trade hit turbulence. Major technology companies including Meta Platforms, Alphabet and Amazon raised spending forecasts further as they race to expand artificial intelligence infrastructure, intensifying investor scrutiny about the profitability of these investments.
Individual technology stocks suffered significant losses following disappointing earnings reports. Intel tumbled nearly 30% on Friday and approached its worst day since 1974, despite reporting stronger profit than analysts expected, because its forecast for the final three months of the year fell far short of expectations. Amazon fell 1.8% after reporting weaker summer profit than anticipated and disclosing higher spending than expected for the year. Alphabet's stock had dropped more than 12% a day earlier, wiping $500 billion from its market capitalization and marking its worst day on record, after the company disclosed it burned through more cash during summer than spring due to major artificial intelligence investments.
Nvidia, previously valued at about $5 trillion and whose chips have become the symbol of the artificial intelligence frenzy, fell 3.1% and was the heaviest force pulling the S&P 500 downward. Broader concerns are mounting about whether the hundreds of billions of dollars in artificial intelligence spending will produce sufficient profit and productivity to justify the investments. At the same time, computer chip companies and other beneficiaries of the race to build artificial intelligence datacenters have come under pressure amid concerns that high interest rates may slow further datacenter expansion.
Despite reaching an all-time high earlier in October, the S&P 500 was on track to erase its monthly gains by Friday. The broader market was roughly evenly split between gainers and losers on the day, with technology stocks' weakness overshadowing mixed performance elsewhere on Wall Street.
For savers and investors with holdings in technology stocks or broad market index funds, the sharp October decline has erased substantial gains despite record highs set earlier in the same month.