Oct 22 (Reuters) – US stocks tumbled on Thursday, with the Nasdaq posting its steepest daily drop since early June as a batch of high-profile earnings reports ignited fresh fears about the AI spending race.
All three major US stock indexes were lower, with the tech-laden Nasdaq, weighed down by microchips, falling 2.7% following a spate of high-profile AI-related earnings results.
Meta Platforms’ results beat analyst expectations, but its stock slid 7.5% as the Facebook parent posted its first cash outflow in more than a decade due to its AI-related expenditures and announced plans to issue non-voting shares in a two-for-one split to raise capital to spend on the nascent technology.
Tesla shares fell 2.1% even though the electric car maker unexpectedly posted positive free cash flow in the quarter and cut its 2026 capital spending plans.
The Philadelphia SE Semiconductor Index, which has driven much of the current bull market’s gains, plunged 6.3%, which would be its biggest daily percentage drop since June 23.
With Thursday’s decline, the SOX is off more than 26% from its record closing high reached on June 22, yet it remains up 52.2% so far this year. The S&P 500 has risen 11.8% gain over the same period.
“It’s the same narrative that we’ve seen in the last few weeks or even few months, where investors are rightfully questioning how much further the tech and AI adoption can go given some of the political and social backlash,” said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. “There’s a hypersensitivity around earnings for AI-related stocks.”
“If you’re a tech CEO, you can’t afford to risk being left behind,” Pursche added. “From an investor’s perspective, we don’t know what the (return on investment) is going to be or whether governments, whether on a local, state, or federal level, might step in with restrictions.”
On the geopolitical stage, Iran-backed Houthis launched new strikes against Saudi targets, sending crude prices to a five-month high. Investors worried that ongoing Middle East strife could keep inflation hot and force the US Federal Reserve to keep raising interest rates.
Data from the Labor Department showed initial claims for unemployment benefits kept drifting along near multi-decade lows. Signs of labor market stability will allow the Fed to focus on fighting inflation. Financial markets are currently pricing in the probability that the central bank will raise its policy rate by another 25 basis points before year-end.
