AI Spending Fears Trigger Broad Tech Selloff, Chip Stocks Plunge and Nasdaq Posts Worst Day Since June

U.S. tech stocks sold off hard on Thursday, Oct. 22, as investors again questioned how long the heavy spending on AI and data centers will take to pay off. The Nasdaq Composite fell 2.6% to close at 26,008.86, its biggest one-day percentage drop since June 5, and the S&P 500 shed 1.2% to 7,663.43, ending a three-day winning streak. The Dow finished little changed at 52,867.98, and the technology and communication services sectors each fell 3%.

Semiconductors took the brunt. By late morning MRVL and AMD were down about 8% and INTC about 7%, with the iShares Semiconductor ETF off 6%. The catalyst was LRCX: CFO Doug Bettinger said the company's $8.6 billion quarterly revenue guidance "would have been a bit higher if not for some near-term supply chain constraints," and the stock fell as much as 9% before the open. CEO Tim Archer said clean room space and component limits would constrain chipmakers into calendar 2027, though he called the tightness "nothing like" COVID-era shortages. Nvidia CEO Jensen Huang added to the unease by telling CNBC there is a "scarcity of capital" for neoclouds such as CoreWeave, even as compute demand is "off the charts"; NVDA closed down 4.4%.

Megacap earnings did not help. META fell 7% after guiding 2026 capital expenditure to $135 billion to $145 billion, and TSLA slipped 3.1%. Saxo Bank warned that AI infrastructure costs could outgrow the profits they generate, and AI-linked power names were hit too, with GEV down almost 10% intraday.

The flip side was a classic defensive rotation. Consumer staples led the S&P 500 and healthcare also outperformed, helped by PG, which rose 5.6% after raising its sales outlook. Treasuries rallied, with the 10-year yield down 17.2 basis points to 4.97%, even as Brent crude rose 3.8% to $112.96 a barrel.

What to watch: whether the remaining hyperscaler reports next week restate or trim AI capex plans, how quickly Lam's supply constraints clear (management expects shipments that slip out of the December quarter to land in the March quarter), and whether the rotation into defensives persists or reverses once the earnings run moves past the AI bellwethers.