Why Are Tech Stocks Down? The AI Selloff and This Week

October was supposed to be the month AI earnings proved the doubters wrong. Instead, the companies spending the most on AI got hit the hardest, and the rest of the market mostly shrugged.

The short version of why tech stocks are down: Wall Street still believes in AI demand, but it has stopped giving companies the benefit of the doubt on what all that spending costs. The Nasdaq composite lost almost 7% in October, its worst month since the April 2025 tariff rout, Reuters reported. Stock futures bounced Sunday night, but this week is packed with events that could restart the slide or end it.

Why are tech stocks down? It's the AI bill, not AI demand

The odd thing about last week's earnings is that the AI businesses mostly did fine. Amazon Web Services grew 40% to $45.9 billion in revenue. Google's cloud unit brought in $30.7 billion against the $29.1 billion analysts expected. Intel's data center and AI segment jumped 78%, Yahoo Finance noted.

What spooked investors was everything around those numbers.

• Cash burn. Amazon, Meta and Alphabet all reported negative free cash flow for the quarter, according to Business Standard. Amazon's shortfall was close to $35 billion, compared with a small positive figure a year earlier.
• Borrowing. Meta's plan for a record $97.5 billion fundraise raised fears about dilution and about other giants having to tap debt markets, Reuters wrote. Microsoft is reportedly planning its first U.S. investment-grade bond sale in more than nine years.
• Credit stress. The cost of insuring Broadcom's debt against default hit a record, and protection on Alphabet's debt rose as well, Bloomberg data cited by Business Standard showed.

J.P. Morgan estimates $900 billion will go into AI capital spending worldwide in 2026 alone. When the price tag is that large, "good" earnings aren't enough. Evercore ISI analyst Mark Mahaney summed up Amazon's drop as "an expectations correction and not a fundamentals correction."

Alphabet, Amazon and Intel did the damage

Alphabet fell about 13% after missing on revenue and profit, as CEO Sundar Pichai acknowledged AI was cutting into how much money search makes. Reuters called it the stock's biggest one-day percentage drop on record. Amazon missed on both earnings and revenue, and strong cloud growth didn't save it.

Why did Intel stock drop 28%?

Intel's fall was the most dramatic. Shares plunged 28.6% on Friday, the worst day since 1974, AP reported. The company actually beat third-quarter estimates, but its outlook didn't come close: $15 billion to $16 billion in fourth-quarter revenue, against the $17.1 billion analysts wanted, and 25 cents a share in adjusted profit versus 43 cents expected, CNBC reported.

Two problems drove that forecast. PC makers are cutting back because memory chips have become so expensive, and CFO David Zinsner said in Intel's earnings release that he expects the slowdown to last "at least through the first half of next year." An explosion at Intel's plant in Israel, which killed two workers earlier in October, also shut down production of some server chips and will cost about $600 million in revenue over two quarters.

The drop stung in Washington too. The U.S. government took a 10% stake in Intel last year, and CNBC estimated that holding lost about $12 billion in value on Friday.

The selloff was narrower than the headlines

Here's the part that gets lost. By Yahoo Finance's count, the biggest AI and chip names lost about $5 trillion since Oct. 6, while the rest of the large-company market gained. The S&P 500 slipped about 0.6% last week even though most of its sectors were up, a split Yahoo said hasn't happened in any down week since at least 1999.

Apple has been the clearest winner of the rotation. It doesn't pour money into data centers the way its rivals do, and it closed Friday worth about $5.03 trillion, back ahead of Nvidia as the world's most valuable company. If you own a broad index fund, the drop you felt was real, but it came mostly from a handful of very large holdings.

Stock market this week: the dates that matter

These are the scheduled events most likely to move stocks between now and Friday, based on Yahoo Finance's calendar:

We broke down what Wall Street expects from Apple, and when the call starts, in our Apple earnings preview.

Stock market after the midterms

Voters pick all 435 House seats and 35 Senate seats on Tuesday. Investors are watching a few races for what they could mean for data center construction, including Ohio's Senate race and the Texas governor's race, along with California's Proposition 40, the proposed billionaire wealth tax. Our early voting guide covers how and where to vote.

The historical pattern is a friendly one. From the end of a midterm-year October through the next June, the S&P 500 has gained every time since 1950, Yahoo Finance noted. That's a statistic, not a promise, and Janus Henderson's Seth Meyer pointed out that companies planning AI spending a decade out don't change course over one election.

The October jobs report and the Fed

Friday's report may matter more than Tuesday's results. Economists expect about 55,000 jobs after September's weak 29,000, with unemployment steady at 4.2% and hourly pay up 0.3% for the month. The Fed raised rates in September and held them in late October, and futures still point to a likely hike in December, as we explained in our Fed decision breakdown. A strong jobs number makes that hike more likely, which tends to weigh on expensive growth stocks. A soft one could help them.

Oil is the wild card

Energy prices are adding pressure from another direction. U.S. crude settled above $104 a barrel on Friday, its highest close since mid-September, with the Strait of Hormuz still effectively shut in the ninth month of the Iran war. Prices fell about 3% in early Monday trading in Asia to around $100.58 as talks continued between Iranian and Qatari mediators, Reuters said. Higher fuel costs feed into inflation, and inflation is the main reason the Fed is still talking about raising rates.

What would turn this around

Bulls need two things this week: an Apple report that shows the market can lean on a company that isn't burning cash on AI, and chip results from AMD, Qualcomm and Arm that ease fears after Intel's warning. Goldman Sachs strategist Ben Snider put the problem plainly in a note quoted by Reuters: earnings growth is strong, "but it is no longer accelerating."

That's the real shift. Investors spent two years paying up for the promise that AI spending would turn into profits. October was the month they started asking when. Nvidia's results in mid-November will be the next big answer, and the jobs report and Fed outlook will decide how much patience the market has until then.

This article is for general information and isn't investment advice.