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Technology shares came under heavy selling pressure last week, with the Nasdaq Composite recording its largest one-day decline since June, according to Reuters. The selloff reflected growing investor skepticism about the massive capital expenditures tied to artificial intelligence infrastructure, even as several companies reported results that met or exceeded forecasts. A Reuters assessment found that Meta Platforms shares dropped 7 percent after the social media company reported its first cash outflow in more than a decade due to AI-related costs and unveiled plans to issue non-voting shares. The Philadelphia Semiconductor Index plunged 6.7 percent in its biggest daily percentage drop since June 23, Reuters data showed.
Meta Platforms results, along with those from Lam Research and Tesla, ignited fresh concerns that returns on AI investments may take longer than anticipated to materialize, a Reuters report stated. Tesla shares declined 3.1 percent despite posting positive free cash flow and lowering its capital spending outlook for 2026. The weakness extended to other AI-related names, with Nvidia falling 4.4 percent and dragging on the broader market even as most non-technology stocks posted gains, according to market data compiled by Reuters.
This week brings earnings from three major technology hyperscalers, Alphabet, Microsoft and Amazon, which will test whether the AI boom can sustain the equity rally now in its fourth year, Reuters reported on October 26. About one-third of S&P 500 companies are scheduled to report results in the busiest week of the earnings season. LSEG IBES data places third-quarter S&P 500 earnings growth on pace to exceed 32 percent from a year earlier, with technology firms playing a central role in that expansion.
The Federal Reserve concludes its policy meeting on Wednesday, with markets assigning roughly an 80 percent probability to a rate increase by December as inflation remains a concern, Reuters figures show. Investors will scrutinize Chair Kevin Warsh’s news conference for signals on the pace of any further tightening. The central bank’s decision comes against a backdrop of stable labor market conditions, where initial unemployment claims have remained near multi-decade lows, according to Labor Department statistics cited by Reuters.
The market pullback coincides with other developments, including the approach of US midterm elections on November 3, where betting favors a shift in congressional control, a Reuters analysis noted. Oil prices climbed to five-month highs following reported Houthi attacks in Saudi Arabia, adding another layer of uncertainty for equities, according to commodity market reports. Yields on US Treasuries fell sharply as investors sought safety in government bonds, with some of the largest one-day declines in years recorded, Reuters market coverage indicated.
Nick Giorgi, chief equity strategist at Alpine Macro, told Reuters that competing catalysts make for a volatile period, with technology earnings likely to decide whether companies can justify their AI outlays. King Lip, chief strategist at BakerAvenue Wealth Management, said in remarks reported by Reuters, “I think earnings will determine whether this tech pullback is a buying opportunity, or is there a deeper correction ahead.” The combination of corporate results and monetary policy guidance will help set the tone for equity markets through the remainder of the year, according to the strategists.
