The Nasdaq Composite fell 2.9% on Friday, its biggest drop since June, closing out its worst month since March 2025 as investors questioned the returns on Big Tech's AI spending. The index finished October 7.8% below its October 6 record close.
The Nasdaq 100 fell 3.5% on Friday, leaving it on the edge of a correction, defined as a 10% drop from a recent high. Intel and Reddit each fell about 29%. Sandisk, a chipmaker that has been a major beneficiary of AI capital spending, lost 13%. Nvidia fell 4%, Broadcom more than 5% and Qualcomm 11%.
Microsoft, Meta, Amazon and Alphabet each slipped 1% to 2% on Friday after bigger losses earlier in the week. Capital Economics estimates those four hyperscalers accounted for more than a third of all capital spending by S&P 500 companies over the past 12 months, and its markets economist John Higgins said investors are growing more nervous about the sums involved.
“voting all of a sudden and all together on who will monetize the investment and who won't”— Brian Jacobsen, Chief economic strategist, Annex Wealth Management
Key facts
- 01The Nasdaq Composite fell 2.9% on October 30 and ended October with its worst month since March 2025.
- 02The Nasdaq 100 dropped 3.5% Friday, leaving it on the brink of a correction, a 10% drop from a recent high.
- 03Alphabet fell 12.64% on October 29, erasing about $500 billion in market value, its worst day on record.
- 04Alphabet, Amazon, Meta and Microsoft have outlined more than $740 billion in combined capex for 2026.
- 05Microsoft, Alphabet, Amazon, Meta and Oracle raised $326 billion in debt in 2026, triple last year's total.
Alphabet took the hardest hit of the week. Its Class A shares fell 12.64% to $283.82 on Thursday, erasing about $500 billion in market value in the company's worst day on record. Alphabet reported $127.6 billion in third-quarter revenue, up 25% but below Wall Street estimates, with Search growth slowing to 12% from 17% the prior quarter. Capital expenditures reached $51.4 billion, and free cash flow was negative $9.1 billion, its second straight quarterly deficit.
The same pattern showed up across the other earnings reports. Amazon expects $220 billion in capex this year and has posted negative free cash flow of $42.4 billion over the past 12 months, even as AWS revenue grew 39%. Its stock fell 7% after Thursday's report. Meta guided to as much as $145 billion in capex this year and posted negative free cash flow of $2.1 billion in the third quarter, despite 26% ad revenue growth.
Meta's spending is tied in part to Muse, its free AI agent. Mark Zuckerberg has described the agent as costly to serve at scale. Meta shares fell 10% the prior week.
“very compute-intensive to run”— Mark Zuckerberg, CEO of Meta
Microsoft was the exception on cash. It generated $18.6 billion in free cash flow in its latest quarter, and its $45.2 billion in capex came in below the $50 billion it had projected. Microsoft attributed the shortfall to delays in third-party capacity rather than a pullback, but shares of smaller neocloud companies that rent out AI compute fell after the revision.
Borrowing is rising alongside the spending. Microsoft, Alphabet, Amazon, Meta and Oracle raised a combined $326 billion in debt in 2026, triple last year's total, according to S&P Global Market Intelligence. Combined, Alphabet, Amazon, Meta and Microsoft have outlined more than $740 billion in capital expenditures for the year.
Not every strategist reads the selloff as a balance-sheet problem. Sahak Manuelian, managing director for global equities sales and trading at Wedbush Securities, said: "I don't think it's a particularly troublesome leverage issue that we're dealing with."
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