Why tech stocks fell this week as AI spending worries hit Wall Street

Why tech stocks fell this week comes down to doubts over artificial intelligence (AI) spending: investors question whether the huge outlay will pay off soon enough. Earnings reports showed continued growth in cloud computing and AI businesses, but investors focused on the rising cost of data centres, chips and computing equipment. The Nasdaq 100 index fell 6.7% in October, its steepest monthly fall since March 2025, according to Mint.

What happened to the big tech names

• Alphabet: shares fell 13% on Thursday, their biggest single-day decline. Its results showed weak growth in search sales and a second straight quarter of negative free cash flow. The company spent more than $50 billion on infrastructure and other investments in the quarter.
• Amazon: shares fell 5.6% over Thursday and Friday, their worst two-day run since July. Cash spending on capital investments exceeded the cash its business generated by about $42 billion over the past year. E-commerce growth was its slowest in three years.
• Meta Platforms: after its October 21 results showed a higher capital spending plan for the year, the shares have fallen about 12%.
• Intel: its profit forecast fell short of analyst expectations and its shares fell nearly 29% on Friday, the steepest one-day fall since 1974.

Why investors reacted this way

Free cash flow is the cash a business has left after paying for the investments it needs to run and grow. Many large technology companies, often called hyperscalers, now spend heavily on data centres. Investors want to see that this spending brings in higher revenue and better margins, and that the business is still producing cash. The latest results did not give enough comfort on those points, so investors cut valuations.

The sell-off was not limited to the United States. Groww said China’s technology-heavy STAR 50 index fell 24% over the past month and is now 40% below its June peak.

The broader market

The move was sharper in technology than in the wider market. Across the week, the S&P 500 slipped about 0.6% and the Dow lost close to 1%. The Nasdaq Composite shed more than 500 points.

What to watch next

In our view, the market is now judging AI spending by cash flow rather than by growth alone. Investors will look at the next quarterly reports from the same companies for signs that capital spending is slowing or that revenue from AI services is rising fast enough to match it. Until then, sharp moves in individual stocks after earnings are likely to continue. For more market coverage, see more economy news. This article is for information only and is not investment advice.