Tech Sell-Off Accelerates on Wall Street as AI Spending Worries Mount
Wall Street tech stocks tumbled on Friday as AI spending concerns sparked a broader sell-off, pushing the S&P 500 down over one percent and Nasdaq down two percent. Meanwhile, energy and defensive sectors showed resilience amid ongoing geopolitical and inflation uncertainties.
A sharp tech sell-off accelerated on Wall Street on Friday as investors grew increasingly concerned that massive artificial intelligence expenditures no longer justify soaring stock valuations. According to media reports, the S&P 500 index dropped by more than one percent during the final trading session of the month, driven by heavy losses across the technology sector.
The Nasdaq Composite plunged by more than two percent. Intel shares crashed by over 25 percent after the chipmaker delivered results that disappointed Wall Street expectations. Amazon shares fell 1.5 percent following an earnings miss. Despite the technology rout, the broader market demonstrated notable resilience, supported by gains in the energy and infrastructure sectors. Consumer staples rose 1.5 percent, while ExxonMobil gained one percent.
These offsetting trends helped alleviate fears that a cooling AI sector would drag down the entire market. Capital did not flee equities entirely but instead rotated toward safer segments. "Money is moving around," explained Chris Galipeau of Franklin Templeton. "We are still close to all-time highs."
Sector Shifts and Tech Pressure
Technology stocks served as the backbone of market rallies for years, but investors are now questioning whether astronomical valuations remain realistic. The communication services sector tumbled by nearly 14 percent in October, led by steep losses at Alphabet and Meta, two major corporations leading AI development.
Alphabet reported earnings this week that disappointed investors due to colossal spending figures. The parent company of Google suffered its worst single-day drop, with its stock plunging 12.6 percent. Alphabet has lost roughly 30 percent of its value since May, officially entering a bear market alongside Oracle and Meta.
Meanwhile, declining growth expectations drove government bond yields downward, helping lift interest-rate-sensitive sectors, which rose by more than nine percent over October.
The energy sector spearheaded market gains following a renewed surge in oil prices. Brent crude jumped to 113 dollars per barrel, compared to approximately 102 dollars at the end of September and roughly 72 dollars before the outbreak of the conflict with Iran in late February. The S&P 500 energy sector surged by more than 11 percent during the month. According to media reports, upcoming midterm elections and the ongoing conflict with Iran continue to generate uncertainty, with many investors fearing a resurgence in inflation that could stall broader economic expansion.
Tel Aviv Stock Exchange Reaction
Trading on the Tel Aviv Stock Exchange also closed in negative territory. The TA-35 and TA-125 indices declined by 2.06 percent and 1.86 percent, respectively. With the exception of Teva and Palo Alto Networks, every constituent stock in the TA-35 index finished the trading session in the red. The Tel Aviv Technology Index recorded a steeper drop of 2.98 percent.
