The tech-heavy Nasdaq 100 shed more than $2.5 trillion in market value in October, according to an Investing.com analysis. [3] From its 6 October peak to the end of the month the index fell more than 9 per cent, MoneyWeek reported. [2] The heaviest days came at the end of October, after the largest technology companies reported their quarterly results.

Yet demand for AI has not collapsed. Cloud revenues are still growing fast. [1] AMD's data-centre sales nearly doubled. [4] What the sources describe instead is a change in what investors reward. "For three years, tech giants only had to announce investment in artificial intelligence (AI) to be rewarded by the stock market," Grégoire Kounowski of the wealth manager Norman K. said, quoted by MoneyWeek. "That is no longer the case." [2]

Investors now want to know when this spending will pay off and how it will be financed, Kounowski added. [2] The sources point to four main reasons for the fall.

1. Spending runs ahead of cash

According to Bloomberg, three of the four largest cloud providers, Amazon, Meta and Alphabet, reported negative free cash flow (cash left after investment) in the latest quarter; Microsoft's stayed positive. [5] Alphabet kept its 2026 investment plan of $195 to 205 billion but signalled a significant further increase for 2027, and its shares fell almost 13 per cent the next day, the Swiss bank UBS noted. [1]

Meta raised the floor of its spending range and its shares fell nearly 7 per cent. [1] "Now they've become asset heavy […]. You have to value them differently than you used to given the money being spent," Anthony Saglimbene, chief market strategist at Ameriprise, told Bloomberg. [5]

2. AI eating into old businesses

AI may also be eating into existing businesses. Google Search handled record volumes, but revenue growth in the segment slowed to 12 per cent from 17 per cent in the previous quarter, MoneyWeek reported. [2] UBS wrote that Alphabet's management indicated AI Mode currently earns less per search. [1] "The bear case many had dismissed is now becoming a reality," Dan Coatsworth of AJ Bell said, quoted by MoneyWeek. [2]

A related squeeze hit hardware. Intel fell 28.6 per cent on 30 October after a weak forecast. [2] UBS explained that AI demand is causing a shortage of components: Intel cannot fully meet data-centre demand, while dearer parts push up PC prices and hurt its PC chip business. [1]

3. Debt-funded data centres

UBS said investors are especially worried about "neoclouds", firms that rent out AI computing power and borrow heavily to build it. They borrow now but earn later, and that income is not guaranteed: it depends on how fully the capacity is used, on customer renewals and on refinancing. [1] Credit markets reacted too: on 29 October the yearly cost of insuring Broadcom's debt against default for five years rose to 1.754 per cent of the amount insured, its highest close on record according to ICE Data Services, Bloomberg reported. [6]

4. Fear spreads to suppliers

Nvidia did not report or forecast anything negative, yet its shares fell 4.22 per cent on 30 October, wrote Itai Smidt in an analysis for Investing.com. [3] In his reading, investors sold the supplier because its biggest customers showed they are spending faster than they generate cash. [3]

Turning point or wobble?

The sources do not agree on what the fall means. AJ Bell's Coatsworth said investors seem to want "to jump off the treadmill rather than slow it down", quoted by MoneyWeek. [2] UBS takes the opposite view: it raised its AI investment forecast to $1.0 trillion for 2026 and $1.4 trillion for 2027, and expects select project delays and consolidation rather than a broad collapse in AI spending. [1]

Early evidence backs this view: on 3 November AMD beat expectations, with data-centre revenue nearly doubling, and its shares rose 8 per cent in after-hours trading, CNBC reported. [4]

Smidt goes further, arguing that the market has priced in a slowdown that no large customer has announced: apart from a small Microsoft trim, none of the biggest spenders cut its 2026 plan. [3]

A further worry is valuations. In August, economists at the European Central Bank wrote in a blog post that research on past technological revolutions "points to a worrisome conclusion: a correction of current stock market valuations is likely", adding that the exact timing "is unknowable in advance". The post states that it does not necessarily represent the ECB's views. [7]