AI Stocks Show Recovery After Nasdaq Records Worst Month in Over a Year Amid Spending Concerns

AI Stocks Attempt Recovery After Brutal Sell-Off

The global AI sell-off showed signs of easing on Monday as US tech stocks prepared to open higher following a punishing week. 1

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Futures for the Nasdaq 100 rose 0.9% during Asian trading, while the S&P 500 gained 0.5%, offering relief after Friday's brutal session that saw the Nasdaq 100 plunge 3.5%. 1

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The Philadelphia Semiconductor Index, tracking major US chipmakers, tumbled 7.2% on Friday. 1

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October marked Nasdaq's worst month in over a year, with the index now down 7.8% from its closing high and approaching correction territory—commonly defined as a 10% decline from recent peaks. 2

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The Nasdaq Composite recorded its worst monthly performance since March 2023, erasing substantial portions of gains from the AI-driven rally. 2

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Hyperscaler Spending Under Intense Scrutiny

Investor concerns center on whether massive investments in AI infrastructure will generate sufficient returns. The four major hyperscalers—Microsoft, Meta Platforms, Amazon, and Google parent Alphabet—have accounted for more than a third of capital expenditures undertaken by companies currently in the S&P 500 over the past 12 months. 2

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Their share of overall spending is expected to increase further, raising questions about financing and sustainability. 2

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Shares of these tech giants fell between 1% and 2% on Friday, extending losses from earlier in the week. 2

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Capital Economics economist John Higgins noted that growing reliance on external financing for hyperscalers' combined capital expenditure adds to concerns about the scale and structure of their spending. 2

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Chipmakers Face Mixed Performance in Asian Markets

AI-related stocks showed divergent performance across Asian markets. SK Hynix and Samsung Electronics, the two biggest memory chip makers, gained 4.6% and 2.2% respectively, driving South Korea's Kospi benchmark up 2.7%. 1

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However, TSMC, the world's biggest contract chipmaker, declined 1.3%, while Japanese memory-chip maker Kioxia slumped 14% after its profit outlook fell short of expectations. 1

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The semiconductor index reflected broader market volatility affecting AI-fuelled tech stocks. Intel plunged 29% on Friday, while SanDisk, a major beneficiary of AI-related capital expenditure boom, fell 13%. 2

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Reddit also slumped 29% as the sell-off extended beyond traditional tech stocks. 2

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Structural Uncertainty Drives Market Volatility

"What we are witnessing is structural uncertainty about the AI build-out expressing itself through episodic panic," wrote Ajay Rajadhyaksha, global chair of research at Barclays. 1

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Ecaterina Bigos, senior market strategist at BNP Paribas Asset Management, noted that "the sell-off that we saw on Friday is decoupled from the fundamental picture." 1

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Investor concerns now focus on distinguishing between companies capable of monetizing their AI investments and those that may struggle to generate returns. 2

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The uncertainty over who will ultimately benefit financially from massive investments in artificial intelligence is adding to selling pressure across AI-related stocks. 2

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Low market liquidity ahead of US midterm elections magnified price swings, according to BNP's Bigos. 1

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The retreat extended beyond tech stocks, with US Treasury prices advancing while precious metals came under pressure. Silver fell 6% on Friday, bringing 2026 losses to 31%, while gold declined 3.5%, down 10% for the year. 2

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Some market participants view recent declines as corrections following exceptionally strong rallies rather than evidence of deeper financial problems. Sahak Manuelian, managing director for global equities sales and trading at Wedbush Securities, suggested sharp gains across tech stocks left the sector vulnerable to significant pullbacks. 2

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Watch whether November brings renewed buying interest or whether the AI infrastructure expansion narrative faces continued scrutiny as investors assess returns on data centers and AI-related capital expenditures.