Tech Stocks Rebound After AI Spending Fears Drive Global Selloff

The week's early gains suggested company profits could keep supporting stocks despite growing doubts about artificial intelligence spending. On October 20, healthcare shares helped lift Wall Street as oil prices fell, according to CNA.

Technology shares then got their own boost. Strong profit reports from SpaceX, Capital One Financial and other companies outweighed disappointing updates from Netflix and AT&T, the Sydney Morning Herald reported on October 21.

On October 21, the earnings rally was already losing momentum. Bloomberg reported that US equity futures slipped as a technology rally faded, trimming gains that had strengthened confidence in the AI trade.

On October 22, Tesla and Meta's third-quarter earnings renewed concerns about high spending and technology development, according to Forbes. The worry went beyond immediate profits: analysts cited by CBS pointed to the large debts AI companies were using to finance data centers and chips.

The selling became a sharp market decline. The New York Times reported that the S&P 500 fell more than 1.4 percent, its largest daily drop since July, while the Nasdaq lost nearly 2.5 percent, its biggest daily decline since June. Al Jazeera subsequently put the Nasdaq decline at 2.6 percent, a slightly different figure.

Oil added another source of pressure. On October 22, the Sydney Morning Herald reported that prices reached their highest levels since May amid worries about the war with Iran. By October 23, oil had climbed above $113, according to Euronews, adding to inflation concerns as investors sought safety in US bonds.

The retreat spread across markets. On October 23, the Economic Times reported that MSCI's regional Asian equities benchmark slipped 0.3 percent for a second consecutive decline. Wall Street also closed lower that day, ending a rocky week, according to Reuters.

By October 26, markets were recovering some ground. World shares mostly advanced and oil prices fell more than one percent, Business Line reported. Later coverage from Yahoo Finance showed the Dow, S&P 500 and Nasdaq rallying as investors assessed Anthropic's IPO filing and the approaching technology earnings reports.

That rebound follows a week in which strong earnings briefly supported technology shares before spending concerns took over. It has not yet settled the question of whether the next results can restore confidence in the AI trade, the issue investors were awaiting earnings to clarify, according to Bloomberg.

Alphabet, Microsoft and Amazon are among the influential AI-related companies reporting financial results this week, according to Business Line. Their reports will give investors fresh evidence to assess after the spending concerns triggered by Tesla and Meta.

The Federal Reserve's next decision is due Wednesday, Bloomberg reported. It arrives with markets also watching oil, whose recent rise added inflation concerns before prices eased.