S&P 500, Nasdaq end sharply lower as revived AI doubts ignite tech sell-off

On Thursday, October 22, the US stock market experienced a significant downturn as fresh concerns about artificial intelligence (AI) spending efforts sent tech stocks tumbling. The Nasdaq posted its steepest daily decline since early June, plummeting 2.6% in the aftermath of a series of high-profile AI-related earnings reports. The S&P 500 also saw a notable drop, ending deep in negative territory.

Despite Meta Platforms meeting analyst expectations, its stock fell 7% amid the company's first cash outflow in over a decade due to AI expenditures and a plan to issue non-voting shares in a two-for-one split. Tesla, meanwhile, saw its shares drop 3.1% after posting positive free cash flow and cutting 2026 capital spending plans.

The Philadelphia Semiconductor Index, which has been a major driver of the current bull market, experienced its largest single-day percentage decline since June 23, sinking 6.7%. The overall market sentiment was still positive, with the Dow Jones Industrial Average managing a nominal gain of 0.02% before the market closed. Investors are increasingly questioning the validity of the AI spending narrative, and this skepticism appears to be impacting the tech-heavy indices, which are heavily weighted towards technology.

Geopolitical tensions between Iran and Saudi Arabia also contributed to a surge in crude prices, raising concerns about potential inflation and the likelihood of the US Federal Reserve continuing its rate hikes.