U.S. stocks fell sharply Thursday as disappointing investor reactions to Meta and Tesla earnings intensified concerns about artificial intelligence spending, while surging oil prices and renewed inflation fears added pressure to financial markets.
By yourNEWS Media Newsroom
Wall Street suffered a sharp technology-led selloff Thursday, Oct. 22, as investors questioned whether massive corporate investments in artificial intelligence would generate sufficient returns, sending the Nasdaq Composite to its steepest one-day decline since June.
The Nasdaq plunged approximately 2.6%, while the S&P 500 fell 1.2%, marking its worst session since July. The Dow Jones Industrial Average managed a slight gain as investors shifted away from technology stocks toward more defensive sectors.
According to The Associated Press, the S&P 500 closed at 7,663.43, down 93.74 points, while the Nasdaq dropped approximately 694 points to finish at 26,008.86. The Dow gained 11.89 points to close at 52,867.98.
The downturn followed quarterly earnings reports from several major technology companies, including Meta Platforms and Tesla, that intensified concerns about the financial sustainability of the artificial intelligence investment boom.
Meta exceeded Wall Street earnings expectations but saw its shares tumble after revealing its first cash outflow in more than a decade, driven by substantial spending on AI infrastructure.
The Facebook parent also announced plans for a two-for-one stock split involving nonvoting shares, a move intended to provide additional flexibility for financing its artificial intelligence expansion.
Despite strong revenue and earnings performance, investors reacted negatively to the company’s growing expenditures and uncertainty about when those investments would generate substantial profits.
Tesla shares also declined after the electric vehicle manufacturer reported quarterly results that included unexpectedly positive free cash flow and reductions to its planned 2026 capital expenditures.
The Reuters market report identified renewed skepticism about AI spending as a central factor behind the losses, particularly among semiconductor manufacturers that have benefited from expectations of sustained demand for computing infrastructure.
The Philadelphia Semiconductor Index plunged, extending a prolonged decline that has erased approximately one-quarter of its value since its June 22 record closing high.
Despite the recent weakness, semiconductor shares remain substantially higher for the year and have outperformed the broader S&P 500.
Chipmakers including Intel, AMD, Sandisk and Marvell suffered significant losses as investors reassessed valuations across the sector.
Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest in Illinois, said the declines reflected a shift in sentiment toward technology companies.
“It’s a wonderful day on Wall Street,” Nolte said. “The only part of the market that is really suffering here is technology, which has been the golden child of the markets up until about June.”
“Investors are starting to realize that there are some holes in the AI story,” he added. “And that’s having an impact on the indices because they’re so heavily weighted toward technology.”
The selloff was compounded by rising geopolitical tensions in the Middle East, where renewed attacks involving Iran-backed Houthi forces increased concerns about regional energy supplies.
Crude oil prices climbed to their highest levels in approximately five months as attacks on Saudi Arabian targets and continued instability around the Strait of Hormuz threatened shipping and production.
According to The Guardian, oil prices approached $112 per barrel Thursday as investors considered the possibility of additional disruptions to global supplies.
Higher energy prices have renewed concerns that inflation could remain elevated, potentially prompting the Federal Reserve to maintain restrictive monetary policies or increase interest rates.
Meanwhile, Labor Department data showed that initial unemployment claims remained near multidecade lows, indicating continued stability in the labor market.
The combination of persistent inflation risks and relatively strong employment could give Federal Reserve policymakers additional room to prioritize price stability.
Financial markets are increasingly considering another quarter-percentage-point interest rate increase before the end of 2026.
Despite the technology downturn, corporate earnings have generally exceeded expectations.
Of the 111 S&P 500 companies that had reported third-quarter results, approximately 83% surpassed analysts’ estimates, according to LSEG data.
Several companies advanced Thursday despite weakness in major technology shares.
Procter & Gamble gained after beating earnings expectations, although the consumer products company warned that increasing costs could pressure future profits.
Blackstone rose after identifying potential investment opportunities arising from wider credit spreads on debt associated with artificial intelligence projects.
Defense contractor Lockheed Martin also advanced after raising its full-year sales and profit outlook.
Spotify shares jumped after the streaming company projected stronger-than-expected fourth-quarter profitability, supported by anticipated subscriber growth and AI-powered platform improvements.
Union Pacific gained following better-than-expected quarterly earnings, although the railroad warned that higher fuel expenses could affect operating costs.
The divergence between technology stocks and other sectors underscored the concentrated nature of Thursday’s decline.
While the Nasdaq and S&P 500 suffered substantial losses, gains in consumer staples, defense and selected industrial companies helped keep the Dow narrowly positive.
The latest selloff highlights growing uncertainty about the financial returns from artificial intelligence investments, particularly as leading technology companies commit billions of dollars to data centers, chips and other computing infrastructure.
With additional corporate earnings approaching and Middle East tensions continuing to affect energy markets, investors face renewed questions about technology valuations, inflation and the Federal Reserve’s next policy decisions.
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