Nasdaq Loses $2T in October as AI Spending Worries Grow
The Nasdaq 100 is set to lose over $2 trillion in October as surging Big Tech AI spending, rising debt and shrinking buybacks worry investors about returns.
October has turned into a rough month for big technology stocks. More than $2 trillion in market value is set to be wiped from the tech-heavy Nasdaq 100 this month, as investors ask a harder question about artificial intelligence: when will the huge spending on AI start to pay for itself? The index has fallen over 5.8% so far in October, and the losses are slightly more than the entire market value of SpaceX.
What happened
The latest round of Big Tech earnings made investors nervous. Meta, Alphabet and Amazon all raised their spending forecasts further as they race to build AI infrastructure, including data centers and chips. Instead of cheering the growth plans, the market focused on the cost and on how long the payoff might take. Alphabet suffered its biggest one-day percentage drop on record on Thursday, after disappointing results in its core search advertising business and a sharp rise in cash burn. Amazon shares also fell after the company reported a sharp cash outflow in the third quarter and signalled another increase in capital spending next year. Intel plunged more than 25% after warning it would burn cash this year, hit by a weak personal computer market, manufacturing problems and heavy spending to expand production. Not every company fell. Microsoft and SpaceX broke from the gloom, with results that showed AI spending starting to pay off. Microsoft also forecast strong cloud growth in its latest earnings report.
Why investors are worried about debt
A second worry is how the AI build-out is being paid for. The prospect of ever-bigger AI outlays has unnerved investors, particularly as rising borrowing costs threaten to make debt-funded investment more expensive and harder to justify. Meta's plans for a record $97.5 billion fund raise heightened concerns about shareholder dilution and whether mounting AI spending could force other Big Tech companies to increasingly tap capital markets. Microsoft is reportedly planning to raise about $25 billion through its first US investment-grade bond sale in more than nine years. Meta, Amazon and Alphabet have issued hundreds of billions of dollars in bond sales over the past four years, worrying investors about overreliance on borrowing to raise capital. The concern is spreading beyond stocks to credit markets, where investors are starting to price in the possibility that rising financing costs, combined with slower returns on AI spending, could squeeze companies previously viewed as relatively safe.
Buybacks have almost disappeared
The spending squeeze is also changing what shareholders get back. The biggest US technology companies generated record amounts of cash in the first nine months of 2026, yet returned the smallest share of it to shareholders in at least 15 years, as surging AI spending squeezed share buybacks. Microsoft, Alphabet, Amazon, Meta and Oracle returned just 9.3% of the cash their businesses generated as dividends and buybacks in the first three quarters of the year, down from 27.4% a year earlier, according to a Reuters analysis of LSEG data and company financial reports. Operating cash flow actually rose 29% from a year earlier to a record $542.9 billion, but capital spending doubled to $556.9 billion, exceeding the cash the five firms generated for the first time in data going back to 2011. That left them with a combined free cash flow deficit of $14 billion, against a surplus of $143.5 billion a year earlier. The squeeze hit buybacks hardest: the five companies cut repurchases 83% to $13.6 billion, from $81.8 billion a year earlier. Alphabet and Meta have not repurchased a share in 2026, after buying back $66.5 billion in the first nine months of last year. Amazon pays no dividend and has not bought back shares since 2022. This matters because buybacks have flattered per-share earnings for years. When companies buy back and retire their own shares, profits are spread across fewer shares, lifting earnings per share even when total profits do not grow. Without that boost, per-share earnings must come from actual profit growth, just as depreciation charges on new data centers start to rise.
The other side of the story
It is not all gloom. Revenue across the "Magnificent Seven" has remained strong since the launch of ChatGPT in 2022, showing demand that investors were initially happy to back, even as the timeline of payoffs remains uncertain. Amazon's cloud business, Amazon Web Services, continued to accelerate, while Meta offered better-than-expected revenue growth and an upbeat outlook. Analysts still expect the spending to keep growing. Morgan Stanley forecasts capital spending on AI infrastructure overall will surpass a trillion dollars next year. J.P. Morgan expects global AI capital spending to reach $5.5 trillion by 2030, and sees $900 billion being spent in 2026 alone. This year's AI capital spending by Amazon, Alphabet, Meta, Oracle and Microsoft would likely equal their cumulative spend since the November 2022 launch of ChatGPT.
What to watch next
The test is not over. Apple is set to report next week and AI bellwether Nvidia is due in mid-November, and both reports will help decide whether October's sell-off was a warning or just a pause. Amazon said it still expects about $220 billion of capital spending this year, and the other companies have signalled further increases. For now, shareholders face a different bargain from the one they signed up for: less cash returned today, in exchange for a bet that AI will eventually generate enough profit to make up for it.
Sources
- Reuters - https://www.reuters.com/business/media-telecom/nasdaq-faces-2-trillion-wipeout-october-ai-spending-fears-deepen-2026-10-30/ - Reuters - https://www.reuters.com/legal/transactional/big-tech-returns-smallest-share-cash-shareholders-15-years-given-ai-spending-2026-10-30/ - CNA - https://www.channelnewsasia.com/business/nasdaq-faces-2-trillion-wipeout-in-october-ai-spending-fears-deepen-6507681