Wall Street Sell-Off Hits AI Stocks as Investors Question Big Tech Spending

US stocks came under heavy selling pressure on Friday as investors reassessed the technology rally and questioned the huge investments driving the artificial intelligence (AI) boom.

The Nasdaq Composite recorded its biggest daily decline since June. The sell-off hit major technology companies and chipmakers, raising fresh concerns about whether spending on AI infrastructure will deliver sufficient returns.

Intel and Reddit shares fell 29% each, while chipmaker Sandisk dropped 13%. Sandisk had been among the major beneficiaries of the surge in AI-related capital spending.

The decline followed losses earlier in the week among major technology companies, including Microsoft, Meta Platforms, Amazon and Google parent Alphabet. Their shares fell between 1% and 2% on Friday.

Investors Question Big Tech’s AI Spending

The four major cloud computing companies, known as hyperscalers, have driven a substantial share of corporate investment.

Capital Economics said Microsoft, Meta, Amazon and Alphabet accounted for more than one-third of the capital spending by current S&P 500 companies over the past 12 months.

Their share could rise further, adding to investor concerns about the scale and financing of their investments.

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John Higgins, a markets economist at Capital Economics, said investors were becoming more cautious as hyperscalers increasingly relied on external financing to fund their spending.

The key question is whether these companies can generate sufficient revenue from AI to justify their investments.

Brian Jacobsen, chief economic strategist at Annex Wealth Management, said investors were now distinguishing between companies likely to monetise AI investment and those that might struggle.

Nasdaq Approaches Correction Territory

The Nasdaq 100 fell 3.5% on Friday after suffering a deeper decline earlier in the session. The index moved close to correction territory, generally defined as a 10% fall from a recent high.

The Nasdaq Composite stood 7.8% below its closing peak. Its worst monthly performance since March 2025 erased part of this year’s AI-driven gains.

The selling also spread beyond technology stocks, signalling a broader retreat from riskier investments.

Treasury prices rose as investors sought safer assets. Silver fell 6% on Friday, leaving it down 31% for the year. Gold dropped 3.5%, taking its 2026 decline to 10%.

Sahak Manuelian, managing director for global equities sales and trading at Wedbush Securities, said the recent declines could reflect profit-taking after a substantial market rally.

He said the market had experienced a significant rise across the technology sector, making a sharp pullback less surprising.

Financial Shares and Bitcoin Also Decline

The market weakness extended to financial companies. Goldman Sachs shares fell 4%, while Jefferies lost 6%.

Bitcoin declined 3% amid reports of a major security breach involving Binance. The supplied report said hackers had stolen more than $6 billion.

Oil prices moved in the opposite direction, rising 2%. The increase added to concerns about the US economic outlook.

Some investors have become concerned about the economy’s dependence on continued AI investment to support growth.

Investors Look for a Fresh Start in November

Friday’s sell-off raised questions about whether the new trading month would bring renewed confidence.

Investors faced uncertainty over the returns from AI spending, the financing of major technology projects and the wider economic outlook.

Manuelian warned that sharp rallies could lead to equally severe declines when investors begin withdrawing money and shifting into other assets.

The next few trading sessions will test whether the market can stabilise after October’s volatile finish.

For now, investors remain focused on whether the AI investment boom can generate sustainable returns and support the valuations of major technology companies.