Tech Stocks Plunge Amid AI Spending Fears and Market Sell-Off

Wall Street experienced its worst trading day in months on Thursday, October 22, as investors aggressively rotated out of high-performing technology assets into safer defensive holdings. The severe market downturn was primarily driven by mounting concerns regarding artificial intelligence infrastructure spending, disappointing corporate results from major industry players, and rising crude oil prices.

The technology-heavy Nasdaq Composite dropped 2.6%, while the Nasdaq 100 fell 2.9%, marking their steepest single-day declines since June. The Philadelphia Semiconductor Index suffered a dramatic 7% plunge, reaching its lowest level in over three months. Meanwhile, the broader S&P 500 retreated 1.2%, while the Dow Jones Industrial Average managed to end near the flat line due to a rotation into consumer staples and utility stocks.

The broad sell-off was initially triggered by Meta Platforms, whose shares fell 7% after the company reported turning free cash flow negative for the first time since its public listing. Compounding investor anxiety, Meta announced massive spending commitments totaling $825 billion for future contracts, escalating worries over the immense capital required to fund artificial intelligence initiatives and the potential pressure on return on investment.

The weakness quickly spread across the technology sector, dragging down major industry giants. Nvidia fell 4.4%, Amazon dropped 4.6%, Alphabet lost 3.1%, and Microsoft decreased 2.2%. Together, five major tech firms cumulatively lost nearly $800 billion in market capitalization during the session.

Memory chip manufacturers faced even steeper losses as sentiment deteriorated across the semiconductor supply chain. Shares of Advanced Micro Devices, Intel, and American depositary receipts of SK Hynix each tumbled approximately 8%. Other memory and storage providers, including Micron Technology, SanDisk, Seagate Technology, and Western Digital, also registered drops ranging between 6% and 8% overnight.

Western Digital shares faced continued downward pressure, declining another 5% in extended trading. This downward movement occurred even though the company's recent financial results comfortably beat expectations, its earnings per share guidance surpassed forecasts, and management boosted its quarterly dividend payout by 17%.

Amid the widespread equity sell-off, investors rushed toward safe-haven assets, causing bond yields to drop sharply. The yield on the US 10-year Treasury fell below the 5% threshold for the first time in over a month, with certain tenors experiencing yield declines of more than 20 basis points as markets recalibrated risk exposure.