AI spending jitters rattle markets as central banks hold rates and earnings diverge
AI spending fears drive a sharp tech sell-off
US stocks fell sharply on Friday, October 30, as earnings from Amazon and Intel intensified investor doubts about whether the enormous cost of building AI infrastructure will produce returns quickly enough. The Nasdaq Composite dropped 2.9%, its steepest one-day decline since June 5, while the S&P 500 fell 1.8%. Intel shares plunged nearly 29% after its results and outlook highlighted pressure from weak PC demand, capacity constraints and spending.
The market reaction reflects a growing divide between enthusiasm for AI’s potential and scrutiny of the cash needed to pursue it. Reuters reported that more than $2 trillion in value was on course to disappear from the Nasdaq 100 in October, as investors weighed higher capital expenditure against near-term cash generation. Meanwhile, earnings across the broader S&P 500 remained strong: with more than half of companies reporting, analysts expected third-quarter earnings growth of 31.6% year over year.
Big Tech’s investment bill becomes the market’s central question
Recent results have made the AI spending debate more concrete. Alphabet shares fell 12.6% after its results showed heavy investment and negative free cash flow. Amazon also came under pressure: despite continued acceleration at cloud unit AWS, investors focused on the scale of its expenditure and cash burn. Meta’s plans for a record $97.5 billion fundraise added to concerns that some technology companies could need outside financing—and potentially dilute shareholders—to sustain their ambitions.
There were counterexamples to the sell-off. Microsoft delivered a strong cloud outlook, while SpaceX’s results also stood out against the gloom. In Asia, memory-chip makers and equipment suppliers continued to report robust demand. The distinction investors are increasingly making is not simply whether AI demand is real, but whether individual companies can convert that demand into durable growth and cash flow.
Global markets turn defensive as October closes
The retreat in technology stocks spread across regions. South Korea’s Kospi fell more than 3% on Friday and was down nearly 16% for October; Japan’s Nikkei also declined, while China’s CSI 300 was headed for its largest monthly drop in a decade, according to Reuters. The moves showed that concern about AI investment and the prospects for chip and data-center demand had become a global market issue, not just a US earnings-season story.
Investors also sought safety in bonds. The yield on the 10-year US Treasury fell to about 4.91% in Asian trading and was down roughly 37 basis points over October, its biggest monthly decline since December 2023. Oil moved in the opposite direction, with prices supported by supply risks and tensions around the Strait of Hormuz. The contrasting moves reflected a market balancing growth and technology concerns against geopolitical risks to energy supply.
Fed, ECB and Bank of Japan keep rates unchanged
Three major central banks ended the week without changing policy rates. The Federal Reserve held its target range at 3.75%–4.00%, while the European Central Bank maintained its deposit rate at 2.50%. The Bank of Japan also stayed on hold, keeping its policy rate at 1.25%. Their decisions left investors focused on how persistent inflation and incoming economic data might shape the next moves.
The Fed and ECB signalled that inflation remains above target, even as they paused. The Bank of Japan’s decision came amid close attention to the yen and the possibility of future policy tightening. The rate holds therefore offered no guarantee that borrowing costs had peaked; instead, markets entered November watching for fresh evidence on inflation, employment and the pace of economic activity.
Chipmakers show AI demand remains strong—alongside market nerves
The sharp share-price reaction to US technology results contrasted with reports from Asian suppliers serving the AI and memory-chip industries. SK Hynix reported a more than sevenfold jump in quarterly profit and said it would return about $75 billion to shareholders. Japanese chip-equipment maker Tokyo Electron forecast an 87% rise in operating profit, while memory-chip company Kioxia announced an interim dividend and outlined further shareholder returns.
These results indicate that demand for AI-related components and equipment remains strong, even as investors question the scale and timing of returns for the companies financing data centers and AI services. That tension is likely to keep chip-sector shares volatile: strong orders and profits can support suppliers, but the market’s broader benchmark remains whether AI spending can ultimately translate into sustainable earnings.
Energy companies benefit as supply risks lift margins
While technology shares sank, Exxon Mobil and Chevron reported quarterly profits above expectations, helped by wider refining margins. Their shares rose 2.2% and 2.8%, respectively, on Friday, standing out in a market dominated by worries about AI spending. Reuters tied the energy companies’ stronger margins to supply disruptions connected to the wars in Iran and Ukraine.
The energy results underscore how different forces shaped the week’s corporate news. Tech investors reassessed capital spending and cash flow, while oil companies benefited from conditions that tightened supply and supported margins. With geopolitical risks still influencing energy prices, the sector’s performance remained a reminder that market leadership can shift quickly when earnings drivers diverge.