The Nasdaq Composite plunged 2.8% today as investors intensified their retreat from technology stocks, increasingly questioning whether Big Tech’s enormous AI infrastructure spending will generate returns fast enough to justify the cost.
The selloff follows yesterday’s 1.4% Nasdaq decline, when Alphabet suffered its biggest one-day percentage drop on record after reporting disappointing advertising results and its second only quarterly negative free cash flow. The Google parent lost 12.6%, wiping roughly $500 billion from its market value.
Friday’s decline broadened after Amazon reported sharply deteriorating cash flow and signaled that its already heavy capital spending will rise again next year. Amazon Web Services revenue grew 39%, but Amazon reported negative free cash flow of $42.4 billion for the 12 months ended Sept. 30, largely reflecting soaring spending on data centers and other infrastructure.
The concern is increasingly less about demand for AI than about its economics. Revenue across the largest technology companies remains strong, while Microsoft has stood out with strong cloud growth and cash flow despite its own heavy AI investment.
Investors are instead scrutinizing how quickly hundreds of billions of dollars in AI infrastructure investment can translate into profits and cash returns. Meta, Alphabet and Amazon have all raised spending forecasts as they race to add computing capacity. Morgan Stanley expects overall AI infrastructure capital spending to exceed $1 trillion next year.
The pressure has spread beyond the hyperscalers. Intel plunged more than 30% today after warning it would burn cash this year amid heavy investment, manufacturing problems and weakness in the PC market. Nvidia fell about 3% and AMD more than 9% in morning trading, while the broader semiconductor index dropped more than 5%.
The Nasdaq 100 is now on track to lose more than $2 trillion in market value in October and has fallen more than 5.8% for the month.
The selloff marks a shift in the AI trade. Investors are no longer rewarding AI spending simply because demand is growing. Increasingly, they want evidence that the unprecedented investment can produce adequate returns – and enough cash to keep financing the buildout.