Big tech stumbles pull the Nasdaq 100 toward correction
A broad tech selloff has the Nasdaq 100 on the cusp of a correction, defined as a 10% slide from a recent record, after retreating from its Oct. 6 high. The index is down 4.45% for the month, putting it on track for its toughest month since March 2025, and it is lagging an equal-weighted S&P 500 by the widest margin since 2001.
Alphabet's post-earnings slide added to the pressure. Search and advertising results reinforced worries that AI is threatening its core engine, and the stock sank 13% at Thursday's close - its biggest one-day drop on record - as the Nasdaq 100 declined 1.4% that session. Amazon dropped 2.4% after Thursday's results as investors fixated on AI spending plans and a sluggish e-commerce unit despite solid cloud growth, dragging the Magnificent 7 lower.
AI spending meets softer legacy businesses
Patience is thinning for tech names whose mainstay operations are wobbling while capital spending plans surge. Matt Maley of Miller Tabak & Co., the firm's chief market strategist, said, "The weakness in their core businesses is a new wrinkle in the debate about whether the ROI on AI is going to come quickly enough to justify euphoria surrounding this technology."
Chip and hardware stocks took heavy damage. Intel is staring at its worst single-day drop on record after issuing a revenue forecast that missed estimates, with shares down 31% as sputtering PC demand and supply-chain issues with lucrative data center components bit into its outlook. Rivals fell too, with Advanced Micro Devices down 13% and Nvidia off 5.4%, while the Philadelphia Semiconductor Index lost 8.8%. Dell, a major PC maker, declined 12%.
Smart investors look for better tools to understand shifts in market dynamics. We're hosting our first ever investor livestream on 11/17 to show you how to use ChatGPT and Claude to invest like a pro, hosted by Briefs Finance CEO Jaspreet Singh. Save your seat.
Early-week optimism fades, rotation picks up
Gains from earlier in the week are at risk of evaporating. Sentiment initially improved on a burst of big tech headlines, including Anthropic PBC's IPO filing, Meta Platforms Inc.'s more than 95 billion dollar capital raise, and SpaceX's 40 billion dollar equipment-finance lease to pay for AI chips. That optimism flipped as investors considered that the AI infrastructure buildout is pushing free cash flows into negative territory and relies on substantial borrowing.
BTIG's chief market technician, Jonathan Krinsky, asked whether tech's slump will bleed into the broader market, writing, "A correlation-one style selloff continues to be elusive, but the set-up for it into November is now more likely, in our view." For now, money is moving elsewhere: the S&P 500 Equal Weight Index rose 1.2% Thursday and roughly 400 constituents were higher. Even so, the outsized weight of tech in the S&P 500 and Nasdaq 100 may begin to drag on both indexes, especially with midterm election uncertainty next week. Maley added, "If the major averages start to fall, investors will likely start to rotate towards cash instead of other sectors, especially with all of the 'bubble' talk they've heard over the past year."
Beyond megacap tech: pain and pockets of strength
The hit list extended across tech. Roblox fell 20% after daily active users missed estimates, and Reddit tumbled 30% after it said it would restrict entry to its message boards to account holders. Outside of tech, earnings helped energy. ExxonMobil Holdings Corp. beat expectations on strength from surging gasoline and diesel prices that drove refining results to an all-time high, lifting the shares 1.7%, while Chevron also topped forecasts and gained 1.6%.
The bottom line: if AI buildout costs keep squeezing free cash flow while core businesses soften, megacap leadership could wobble and index concentration risk goes up. Breadth is improving under the surface, but the chance of a broader risk-off into November is higher.
Learning how new technology can sharpen your investment decisions pays off. On 11/17, our CEO Jaspreet Singh goes live for our first ever investor livestream on how to use ChatGPT and Claude to invest like a pro. Register to join him.
