Tech Sell-Off Wipes Nearly $1tn Off Nasdaq in a Single Week

By Grace Kim

US markets shed nearly $1 trillion in tech value in one week, and about $2 trillion in a month, as a sell-off that started earlier in the month accelerated Friday on disappointing earnings from the industry's biggest names.

The S&P 500 fell more than 1% Friday, losing hundreds of billions of dollars in market value and putting it on track to erase its entire gain for October — the same month in which it set its all-time high. The tech-heavy Nasdaq composite fared worse, dropping more than 3% and erasing hundreds of billions more. The Dow Jones Industrial Average fell less.

The takeaway in plain words: the rally that pushed stocks to records in October has been cut down by the very companies that powered it.

How much has the AI trade lost?

More than $2 trillion in market value is set to be wiped from the Nasdaq 100 this month, as big tech earnings intensified investor scrutiny of whether the billions pouring into artificial intelligence can generate returns quickly enough.

For scale: that wipeout amounts to slightly more than SpaceX's entire market value. The Nasdaq 100 has fallen more than 5.8% so far in October as the AI trade hit turbulence — even as hyperscalers Meta Platforms, Alphabet and Amazon raised their spending forecasts further in a race to expand AI infrastructure.

The plain-English version: investors are paying record sums for AI capacity while starting to ask, out loud, when the profits arrive.

Why did Intel fall 30% in a day?

Intel tumbled nearly 30% Friday and was flirting with its worst day since 1974 — even though the chipmaker reported a stronger profit for the latest quarter than analysts expected. The problem was the outlook: Intel's forecast for profit in the final three months of the year fell far short of analysts' expectations.

Amazon fell 1.8% after reporting a weaker profit for the summer than analysts expected. The company also disclosed it had spent more this year than anticipated.

A day earlier, Alphabet's stock dropped more than 12%, wiping $500 billion from its market capitalization in the worst day on record for the company. Alphabet told investors it had burned through more cash during the summer than the spring because of similar, mammoth investments in AI.

The pattern across all three: spending is climbing faster than the profits that justify it.

What does this mean for Nvidia and the chip trade?

Nvidia, previously worth about $5 trillion and the poster child of the AI frenzy, fell 3.1% — the single heaviest force pulling the S&P 500 downward.

Stocks of computer chip companies and other winners from the datacenter-building frenzy have come under pressure on concerns that high interest rates may slow further construction of data centers. Worries are rising about whether all those hundreds of billions of dollars will produce enough profit and productivity to make AI investment worth it.

Chipmakers, in short, are now absorbing both sides of the trade: the AI build-out optimism and the rate-driven cost of building.

Is the broader market holding up?

Mostly, yes — for now. Friday's losses overshadowed an otherwise mixed day on Wall Street, with the S&P 500 roughly evenly split between gainers and losers.

Expectations remain high broadly for US companies' ability to deliver bigger profits, even though people around the world are feeling discouraged about high inflation and high fuel prices. Those expectations are what drove the S&P 500 to its record earlier this month.

The question heading into the final two months of the year is whether the hundreds of billions still committed to AI infrastructure can start showing up in profit lines — because October's $2 trillion correction shows the market's patience has a price tag.