The Nasdaq seems to post its worst day since June as Meta’s AI spending and a 6.7% chip-stock plunge revive doubts about the AI boom

Wall Street’s technology stocks seem to have had their roughest day in months on Thursday, Oct. 22. The Nasdaq Composite lost 694.00 points, or 2.60%, to close at 26,008.86, according to Reuters, which calls it the index’s “steepest daily drop since early June.” The S&P 500 lost 93.74 points, or 1.21%, to 7,663.43. The Dow Jones Industrial Average rose 11.89 points, or 0.02%, to 52,867.98. CNBC says the S&P 500 posted “its worst session since July,” and AP reports the same, writing that “the latest shudder for AI stocks pulled markets lower around the world.” Reuters columnist Jamie McGeever writes that the Nasdaq shed $1 trillion of market value.

Chipmakers took the hardest hit. The Philadelphia SE Semiconductor Index, which Reuters says “has driven much of the current bull market’s gains,” plunged 6.7%, its biggest daily percentage drop since June 23 (Reuters). Intel, AMD, Sandisk and Marvell each fell more than 8%, Reuters reports. CNBC says the tech sector as a whole fell 3%, with Nvidia down 4.4%, Alphabet down 3.2% and AMD down 8.1%. The chip index now sits more than 26% below its record close of June 22, yet remains up 51.5% for the year, against an 11.9% gain for the S&P 500, according to Reuters.

Meta seems to have set the tone. The company reported third-quarter revenue of $64.60 billion, up 26% from a year earlier, in a press release on Wednesday, Oct. 21. The same release shows capital expenditures of $34.91 billion for the quarter and free cash flow of negative $2.12 billion, and narrows Meta’s 2026 capital spending outlook to $135 billion to $145 billion. Chief executive Mark Zuckerberg said in the release: “Our investments are paying off, the core business is strong, and we're seeing velocity across the board.” According to CNBC, the stock first rose about 2.5% in after-hours trading Wednesday. By Thursday’s close it had slid 7.0%, and Reuters says the company “posted its first cash outflow in more than a decade due to its AI-related expenditures.”

Meta’s earnings per share depend on how one counts. The release reports diluted earnings of $3.83 a share, which includes a $9.89 billion cost tied to an agreement with 52 state attorneys general; without that cost, Meta says, the figure would have reached $7.40. Kiplinger writes that $3.83 “fell short” of Wall Street’s estimate, while CNBC wrote on Wednesday that it seemed unclear whether the result compared with the $5.75 analysts expected.

Meta also announced a new kind of share. Its board approved “a new class of publicly listed, non-voting Class C common stock,” with an effective date of Jan. 19, 2027, and plans to hand one Class C share to holders for each Class A and Class B share they own, the release says. Meta expects the Class A price to “reflect the effect of a two-for-one stock split” and says the dividend “will not change the voting power of any shareholder.” CNBC quotes the company as saying the new stock should “provide Meta the ability to finance its growth.” Reuters describes the plan as a way “to raise capital to spend on the nascent technology.” CNBC and Kiplinger also report that, according to a Meta filing, the plan forms part of a deal in which Zuckerberg committed to stay in California for eight years, as a proposed state wealth tax heads to voters in November.

Not everything fell. Reuters reports that Procter & Gamble rose 5.6% after its results beat estimates, Blackstone gained 8.4%, Lockheed Martin climbed 7.0% after raising its forecast, and Spotify rose 11.1%. Tesla, which reported results the same evening as Meta, fell 3.1% even after it “unexpectedly posted positive free cash flow,” Reuters says. Paul Nolte, a market strategist at Murphy & Sylvest, told Reuters: “It’s a wonderful day on Wall Street. … The only part of the market that is really suffering here is technology, which has been the golden child of the markets up until about June.” He added: “Investors are starting to realize that there are some holes in the AI story.”

Voices on the AI trade split on what the drop means. Nvidia chief executive Jensen Huang told CNBC on Thursday: “There's a scarcity of capital. The demand [for] the capital is much greater than the availability of the capital.” CNBC says he made the remark about the “neocloud” part of the AI buildout. Ed Yardeni, president of Yardeni Research, called the trade a “bubble” but told CNBC: “Taking some air out of the AI bubble is a good thing. I don't think it's going to burst and create problems for the economy.”

Money moved toward safer assets. The 10-year Treasury yield fell 18.5 basis points (0.185 percentage point) to 4.961%, CNBC reports, its largest one-day decline since March 2023, which helped lift homebuilder, regional bank and real estate funds. McGeever writes that US yields fell by as much as 20 basis points across the curve, that the Japanese yen and Swiss franc led gains among major currencies, and that bitcoin fell 4% and gold 2%. Stocks fell in Asia too, he writes, with South Korea down 3.5%, Japan down 2.5% and China down 2%.

Oil climbed at the same time, and the sources give different reasons. CNBC says Brent rose 4% to settle at $113.17, its highest settle since May, “following a report that the U.S. and Israel were drawing up plans for renewed attacks on Iran.” Reuters ties the move to new Houthi strikes against Saudi targets and says investors worry the Federal Reserve may “keep raising interest rates.” Kiplinger links it to President Donald Trump saying the US has no current talks with Iran to end the war. Kiplinger notes that the Fed meets next week. This desk gives no investment advice, and one day’s move says little about where prices head next.