S&P500 and Nasdaq 100: AI Capex Worries Fuel Broad Stock Market Retreat in US Indices

AI-Driven Tech Selloff Deepens, Nasdaq Set to Break 7-Week Win Streak

U.S. stocks extended Thursday’s steep decline early Friday, with all three major indexes trading sharply lower as of 14:35 GMT. AI valuation concerns and persistent selling in tech are driving the Nasdaq toward a weekly decline, threatening to end its seven-week rally.

The Nasdaq Composite is down 362.04 points to 22,508.32, off 1.58%, with a weekly loss of 0.6% in sight. The S&P 500 is trading at 6,657.89, down 1.18%, while holding a narrow 0.1% gain for the week. The Dow Jones Industrial Average has dropped 573.62 points to 46,883.60, off 1.21%, still up 1% on the week after breaching the 48,000 level earlier.

Why Is Tech Leading the Market Lower?

Technology remains the weakest sector, down 1.85% to 5,589.17 and trading near session lows. The Technology Select Sector SPDR Fund (XLK) is down nearly 4% over two sessions. Communication Services has fallen 1.62%, while Consumer Discretionary is off 1.42%.

Semiconductors are taking a beating, with Nvidia and AMD both down 3%. Applied Materials has dropped 6% despite beating earnings estimates with $2.17 per share on $6.8 billion in revenue. A cautious full-year revenue outlook of $6.85 billion — barely ahead of expectations — has disappointed investors seeking more aggressive growth.

Tesla and Palantir are each down 4%, adding to Thursday’s 6%+ losses. Alphabet and Meta are off 2% and 1%, respectively. Robinhood is down 5%, despite a 34% jump in equity trading volume and a 22% gain in options activity from September to October.

Are Any Sectors Providing Support?

Defensive sectors are holding up better, but gains are minimal. Real Estate is up 0.44% and Consumer Staples has edged 0.03% higher. Most other sectors are in negative territory, with Financials down 1.14%, Industrials off 0.71%, and Energy and Utilities showing fractional losses.

How Are Bonds and Crypto Responding to the Risk-Off Trade?

Bitcoin has fallen below $95,000, tracking tech sector weakness and reflecting broad risk aversion. U.S. Treasury yields are declining, with the 10-year at 4.083%, the 2-year at 3.56%, and the 30-year at 4.683%. The bid for safe-haven assets suggests rising caution heading into year-end.

Is the Fed Still Expected to Cut Rates in December?

Rate cut expectations are fading. The CME FedWatch Tool shows a 52% probability of a December cut, down from 62.9% earlier this week and 95.5% a month ago. Persistent inflation concerns and cautious Fed commentary are weighing on policy outlooks.

At the same time, investors are questioning the return potential on massive AI-related capex. Oracle’s recent results and guidance have amplified concerns about overextended tech valuations and excessive debt-financed spending.

Market Forecast: Bearish Through Year-End

With tech leadership fading, Fed support diminishing, and visibility clouded by the recent government shutdown, the market looks vulnerable to further downside. Unless sentiment improves quickly, equities — particularly in the tech sector — face continued pressure into year-end.

More Information in our Economic Calendar.