Big Tech's AI spending drags on stocks as Nasdaq nears correction
Nasdaq is down over 7.5% from its October 6 record and chip index is in a bear market. Investors worry about AI spending and surging borrowing by tech giants.
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what happened
According to Moody's, the Nasdaq Composite has fallen more than 7.5% from its record peak on October 6 and is close to correction territory, a drop of 10% from a previous high. The PHLX Semiconductor index, the main benchmark for chipmakers supplying the AI buildout, has slid nearly 28% from its June record and is technically in a bear market. The S&P 500's technology sector closed Friday 11.1% below its early October peak.
Analysts point to three causes: mixed earnings from megacap tech firms including Alphabet, Meta Platforms, Microsoft and Amazon, higher capital costs tied to huge AI spending plans, and uncertainty over how that spending will affect bottom-line earnings. CME FedWatch puts the odds of a Federal Reserve rate hike at its December meeting at 75%. This year the sector has taken on $655 billion in new borrowing, an unprecedented amount, and companies are increasingly turning to equity markets. Oracle said it plans a $20 billion bond sale and a $10 billion stock sale, while Meta announced a $95 billion equity raise last month.
Views differ. Deutsche Bank moved the sector back to Overweight, Citigroup expects hyperscaler revenue to grow 30% next year, and Melius Research argues that the capital shortage will eventually lead to a slump. Key events ahead include the US midterm elections on Tuesday and this week's earnings reports from Apple, AMD and Broadcom.
why it matters
The key takeaway for investors is that tech is no longer lifting the whole market. Whether Big Tech can turn AI investment into real revenue, along with expectations for Fed rates, remains the central question for stocks and chipmakers as the year ends.
market impact
Tech stocks and chipmakers: worries over AI spending weigh on the major indexes
- Nasdaq Composite pressure down — worries about AI spending and rising borrowing weigh on the largest tech stocks
- PHLX Semiconductor index pressure down — doubts about returns on AI investment hit chipmakers supplying data centers
instruments
sources
- Big tech's AI binge is sinking the market. Can Santa save it? — Moody's, 3 November 2026 at 04:03 UTC
prepared by the newsmetry newsroom with ai assistance from the sources listed below. not investment advice.
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