By Hamza Faisal
Wall Street's love affair with artificial intelligence had its roughest day in months on Thursday, as investors dumped technology shares over the spiraling cost of the AI arms race. The Nasdaq Composite plunged 2.6 percent to 26,008.86 — its steepest one-day fall since June — the Nasdaq 100 slid 2.9 percent, and the Philadelphia Semiconductor Index collapsed nearly 7 percent, the chip gauge's biggest single-day drop since June. The S&P 500 shed 1.2 percent.
The blue-chip Dow Jones escaped, eking out a 0.02 percent gain to 52,867.98 as money rotated into defensive dividend payers and utilities, and Treasuries staged their biggest rally in more than two years.
Meta's cash bonfire spooked everyone
The panic started at Meta, whose shares fell 7 percent to their lowest in about six weeks — erasing more than $100 billion in market value — after it reported a free cash flow deficit of $2.12 billion, its first cash outflow in more than a decade.
Revenue of $64.6 billion, up 26 percent, beat expectations — but nobody cared. What rattled the market was the spending: quarterly capital expenditure hit $34.91 billion, the 2026 capex forecast floor rose to a $135–145 billion range, and Meta disclosed $825 billion in future contract spending commitments, up from $700 billion in July. Meta also unveiled a plan to create new non-voting Class C shares to fund its AI buildout, which analysts read as a path to future dilution.
"The market has been questioning whether all the spending on AI is having the type of returns that the market originally expected," said Steve Sosnick, chief market strategist at Interactive Brokers. The cost of insuring Meta's debt against default — its five-year credit default swaps — widened to a record 114.79 basis points.
Chips took the heaviest beating
Meta's fall tore through its megacap peers: Nvidia fell 4.4 percent, Amazon 4.6 percent, Microsoft 2.2 percent and Alphabet 3.1 percent, cumulatively wiping nearly $800 billion off their market values. Only Apple and Netflix rose among the big names.
Semiconductor stocks had it worse: AMD, Intel, SK Hynix ADRs and SanDisk each fell about 8 percent, while Micron, Western Digital and Sandisk dropped 6 to 8 percent. Western Digital fell another 5 percent in extended trading even though its quarterly results beat expectations and it raised its dividend 17 percent — proof that good earnings are no shield right now.
With Thursday's plunge, the Philadelphia Semiconductor Index is down more than 26 percent from its June 22 record close, though still up over 51 percent for the year. Tesla fell 3.1 percent despite posting positive free cash flow and cutting its 2026 capital spending plans. Not everything fell: Spotify jumped 11.1 percent after forecasting fourth-quarter profit above expectations, while Lockheed Martin rose 7 percent on a raised forecast.
Rotation, not retreat
"Investors are starting to realize that there are some holes in the AI story," said Paul Nolte, senior market strategist at Murphy & Sylvest. "And that's having an impact on the indices because they're so heavily weighted toward technology."
The rout spread beyond equities: Brent crude jumped 4 percent to $113.10 a barrel on deadly attacks in Saudi Arabia, the 10-year Treasury yield fell 17 basis points to 4.95 percent, and neocloud name CoreWeave slumped 8.4 percent — down more than 34 percent this month.
The next test comes fast: Alphabet and Microsoft report on October 28, followed by Amazon and Intel on October 29. After Thursday, Wall Street will grade those results on one question only — how much cash is left once the data centers are paid for.
