Wall Street sell-off deepens as AI spending fears wipe billions off tech shares on Friday
The Nasdaq fell more than 3.8% and the S&P 500 dropped 2.5% on Friday in their worst day since June, as investors punished big technology companies over the returns on their enormous artificial intelligence spending.
Wall Street suffered a steep day of losses on Friday after the latest technology earnings reignited concerns that massive spending on artificial intelligence may not deliver the returns investors expect. The Nasdaq Composite dropped more than 3.8% and the S&P 500 fell 2.5%, each suffering their worst day since June, while the Dow Jones Industrial Average fell 770 points, or roughly 1.5%, its worst day since July.
Just a few weeks ago, the Nasdaq and the S&P 500 had clinched record highs. The Nasdaq is now down almost 9% from its record high earlier this month, while the S&P 500 is down 3.5%, as a bruising month for artificial intelligence stocks comes to a close.
Intel was the day's biggest casualty. Its shares plunged more than 30% — and nearly 29% on some counts — after the chipmaker issued weaker guidance for the fourth quarter, citing weakness in the personal computer market and manufacturing bottlenecks. The fall came despite Intel reporting a 21% rise in revenue to $13.7 billion, as investors focused on its forecast of adjusted earnings of 25 cents a share on revenue of $15 billion to $16 billion, below analysts' estimates of $17.1 billion.
Amazon shares fell about 2% after the e-commerce giant reported revenue of $201.9 billion and net income of $20.7 billion, both of which missed Wall Street estimates, alongside negative free cash flow of $42.4 billion and another increase in artificial intelligence spending. Reddit tumbled around 30% despite a strong earnings report, after its chief executive warned that Google's artificial intelligence summaries are hammering its web traffic, with search referrals dropping by an average of more than one million a week during October.
The sell-off spread across the semiconductor sector. Nvidia shares dropped 5.6%, while a closely watched index of chipmakers sank 9%. Shares in the artificial intelligence memory business fell sharply, with Sandisk down 14.9%, AMD down 11.9% and Broadcom down 6.3%. Alphabet, which had already lost more than half a trillion dollars in market value on Thursday in its worst single-day decline ever, fell another 1.5% on Friday.
Alphabet, Microsoft, Meta and Amazon are collectively spending hundreds of billions of dollars on building data centres, and investors are increasingly demanding evidence that those investments will eventually translate into profit. Microsoft, which this week announced $18.6 billion in positive free cash flow for the past quarter, has fallen just 5% since its record high earlier this month, a far milder retreat than its peers.
Friday marked the final trading day of a bruising month for artificial intelligence stocks, capping weeks in which investors have swung between fears of an 'AI bubble' and optimism about the new technology. Google and Meta are now in a bear market, down more than 20% since their peaks in May and August 2025 respectively.
Not every part of the market fell. Consumer staples and health care shares rose, with State Street's consumer staples fund reaching an intraday record, while oil companies gained after ExxonMobil and Chevron both reported large third-quarter profits. FedEx Freight was the best performer in the S&P 500, jumping 15% after raising its profit outlook.
The session followed Thursday's falls, when the S&P 500 closed at 7,720.39, down 0.30%, and the Nasdaq fell 1.38% to 26,184.72, led lower by Alphabet's 12.6% drop. Earlier in Asia on Friday, South Korea's Kospi had led regional losses, closing 3.96% lower, while Taiwan's TAIEX shed 3.19% and Japan's Nikkei 225 dropped 1.88%.
For investors, the question now is whether the artificial intelligence trade — the engine of this year's market gains — is entering a longer correction or simply pausing after an extraordinary run. With the Federal Reserve's December meeting approaching and rate-hike bets still in play, the next round of earnings and economic data will test whether the market's faith in big technology spending can be restored.
Figures checked at 00:25 PKT on 31 October 2026.
This post is market news information only, not financial advice.
