31/10/26, US Financial Markets Report

 The Nasdaq Composite plunged 2.86% on Friday, marking its steepest single-day percentage decline since June 5, as disappointing quarterly results from Intel and Amazon intensified concerns over the enormous investments technology companies are making in artificial intelligence (AI) and how quickly they can generate returns.

The technology-heavy index shed 747.73 points to close at 25,437, while the S&P 500 dropped 1.82% to 7,580.07. The Dow Jones Industrial Average declined 572.25 points, or 1.09%, to settle at 51,770.31.

The Nasdaq has now fallen 7.8% from its record closing high of October 6, reflecting growing investor unease over the sustainability of the AI-driven rally. The S&P 500 and Nasdaq also ended October in the red, although the Dow managed to register a monthly gain.

The immediate trigger for Friday's selloff was a disappointing earnings-driven reaction to results from Intel and Amazon, released late Thursday. Intel shares crashed 28.6%, while semiconductor and server-making stocks faced heavy selling.

Nvidia declined 4.2%, Advanced Micro Devices (AMD) slumped 10.9%, and the broader semiconductor index shed 7.2%, taking its monthly losses beyond 15%. Server manufacturers Dell and HP fell 10.8% and 9.6%, respectively.

"It's fair to say that this week, not just today, has been very much about the future of AI and what that's going to look like, whether there will be a positive return on investment and if so, how quickly," Oliver Pursche, senior vice president at Wealthspire Advisors in New York, told Reuters.

"Companies that are performing and meeting the very lofty expectations that have been set are doing well. Those that are falling short and seem to be missing the mark or not executing as expected are getting punished," he added.

According to Reuters, more than $2 trillion in market value is set to disappear from the Nasdaq 100 in October, as Big Tech earnings have intensified scrutiny of the returns on AI investments. The index has declined more than 5.8% this month.

The concerns have grown as major cloud and technology companies continue to raise their spending projections. Meta Platforms, Alphabet and Amazon have signalled higher investments in AI infrastructure as they compete to expand computing capacity.

The prospect of sustained spending at such levels has also raised questions about how companies will finance their expansion, particularly as borrowing costs increase.

Meta's plans for a record $97.5-billion fundraise have added to concerns about potential shareholder dilution and the growing financial burden of its AI ambitions.

Microsoft, meanwhile, is reportedly considering raising around $25 billion through its first US investment-grade bond sale in more than nine years. Meta, Amazon and Alphabet have collectively issued hundreds of billions of dollars in bonds over the past four years, adding to investor concerns about the industry's growing reliance on debt.

Morgan Stanley expects capital expenditure on AI infrastructure to exceed $1 trillion next year. JPMorgan has forecast global AI-related capital spending could reach $5.5 trillion by 2030, with around $900 billion expected to be spent in 2026.

The concerns extend beyond infrastructure costs to the ability of technology companies to sustain growth in their core businesses.

According to Bloomberg, the advertising, consumer and retail operations that underpin the biggest US technology companies are showing signs of slowing, even as their combined AI investment commitments approach $750 billion this year.

Alphabet suffered its biggest-ever one-day percentage decline on Thursday after its results raised concerns over its core search advertising business and accelerating cash expenditure.

S&P Global Ratings has also taken an initial step towards potentially downgrading Meta's credit rating within the next two years, citing pressure on its balance sheet from elevated AI-related spending, Bloomberg reported.

Apple, meanwhile, reclaimed its position as the world's most valuable publicly traded company from Nvidia, as investors appeared to favour the iPhone maker amid concerns over the financial demands of the AI race.

However, not all technology companies have faced the same pressure. Microsoft and SpaceX have stood out from the broader gloom, with results indicating that investments in AI are beginning to translate into business returns.

Despite the market reaction, corporate earnings across the broader S&P 500 have remained relatively strong. Of the 299 companies that had reported third-quarter results, 82% had exceeded consensus estimates, according to LSEG data cited by Reuters. Analysts are now expecting earnings growth of 31.6% year-on-year for the quarter.

Outside technology, energy stocks were among the relative gainers on Friday after Exxon Mobil and Chevron reported quarterly profits above market expectations.

Both companies benefited from stronger refining margins amid disruptions to global energy supplies linked to the US-Israeli war with Iran and the Russia-Ukraine conflict. Exxon Mobil rose 2.2%, while Chevron gained 2.8%.

Cryptocurrency-linked stocks, however, came under pressure following reports that hackers had stolen $6.3 billion from Binance, the world's largest cryptocurrency exchange.

Coinbase, Strategy and Robinhood declined between 7.2% and 10.6%.

The broader market's weakness was also reflected in trading breadth. On the New York Stock Exchange, declining stocks outnumbered advancing shares by a ratio of 1.8 to 1. On the Nasdaq, the ratio widened to approximately 3 to 1, with 3,622 stocks falling against 1,196 advancing.

Trading volumes across US exchanges reached 19.87 billion shares, compared with the 20-day average of 17.26 billion.

Report by with inputs from NewsAgencies by Network18