NEW YORK, October 22, 2026 — US stocks fell sharply on Thursday, with the Nasdaq Composite declining more than 2% as investors questioned whether massive investments in artificial intelligence infrastructure would generate sufficient returns. Disappointing market reactions to earnings from Meta Platforms and Tesla, along with a recovery in oil prices, added to the pressure.
Meta shares fell 5.2% after the social media company announced a new class of non-voting shares to help finance its costly AI expansion. The decline came despite quarterly revenue exceeding expectations and an optimistic fourth-quarter sales forecast.
Tesla also moved lower, slipping 0.7% after reducing its annual capital expenditure forecast, prompting questions about the pace of its AI and robotics ambitions.
The downturn reversed Wednesday’s AI-driven rally, which had been supported by strong results from SpaceX and Super Micro Computer. Investors shifted their attention from earnings growth to the enormous capital required to build AI infrastructure and the uncertainty surrounding future returns.
Technology and Semiconductor Stocks Lead Declines
The selloff hit semiconductor companies particularly hard. The Philadelphia Semiconductor Index dropped 5.6%, reaching its lowest level since July 29. The decline put more than $616 billion in market value at risk across the index’s constituents, while the Nasdaq-100 was on track to lose nearly $1 trillion in value.
Steve Sosnick, chief market analyst at Interactive Brokers, said investors were reassessing both the pace of AI investment and the returns those expenditures could generate.
Other major technology companies also declined. Amazon and Nvidia each lost more than 3%, adding to pressure on the so-called Magnificent Seven group of leading US technology stocks.
At 11:58 a.m. ET, the Nasdaq Composite had fallen 551.50 points, or 2.06%, to 26,152.90. The S&P 500 dropped 85.27 points, or 1.10%, to 7,671.90, while the Dow Jones Industrial Average slipped 29.18 points, or 0.06%, to 52,826.91.
Six of the S&P 500’s 11 sectors were trading lower, led by technology, which declined more than 2.7%.
Oil Prices and Geopolitical Tensions Add Pressure
Energy markets contributed to the cautious mood. Brent crude hovered near a five-month high after additional Houthi attacks in Saudi Arabia heightened concerns about potential supply disruptions and a broader Middle East conflict.
Investors also moved toward safer assets, pushing the 10-year Treasury yield down to approximately 5.0025%.
Meanwhile, weekly US jobless claims unexpectedly declined, indicating that the labor market remained resilient. The data reinforced expectations that the Federal Reserve would leave interest rates unchanged at its meeting the following week.
Consumer Staples and Select Stocks Defy the Selloff
Despite broad weakness in growth stocks, several companies recorded strong gains.
Consumer staples led the S&P 500’s advancing sectors, rising 2.5%. Procter & Gamble jumped 6.1% to a nearly eight-month high after reporting first-quarter results that exceeded revenue estimates, although the company warned that higher commodity costs would put additional pressure on annual profits.
Blackstone gained nearly 6% after beating third-quarter profit expectations. Chief Operating Officer Jon Gray said widening credit spreads on AI-linked debt could create opportunities to secure higher returns.
Lockheed Martin climbed 5.9% after raising its annual sales and profit forecasts, supported by increased missile and aircraft production.
Spotify rose 9% after projecting fourth-quarter profit above Wall Street expectations, with the Swedish music-streaming company counting on AI-powered features to help drive user growth.
The S&P 500 value index remained flat, contrasting with a 2.2% decline in its growth counterpart.
Earnings Growth Remains Strong Despite Market Volatility
Corporate earnings expectations offered a counterpoint to the market downturn. According to LSEG data, third-quarter profit growth for S&P 500 companies was projected at 32.3%, up from an earlier estimate of 30.7%.
However, strong aggregate earnings forecasts have not eliminated concerns about the sustainability of AI-related investment or the valuations of companies most closely associated with the technology.
Market breadth also reflected the weakness. Declining stocks outnumbered advancing shares by 1.06 to 1 on the New York Stock Exchange and 1.23 to 1 on the Nasdaq.
The S&P 500 recorded 35 new 52-week highs and three new lows, while the Nasdaq Composite registered 70 new highs and 247 new lows.
For investors, Thursday’s trading highlighted a growing divide between companies delivering strong results and those facing questions about spending, valuations and future profitability. As AI investment continues to expand, markets may remain sensitive to evidence that the substantial costs of building the technology are translating into sustainable financial returns.
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