By Stephen Culp and Tharuniyaa Lakshmi
NEW YORK, Oct 22 (Reuters) – U.S. stocks fell on Thursday and the Nasdaq posted its biggest daily decline since early June, as a series of high-profile results reignited fears about the race to spend on AI.
The S&P 500 ended in negative territory. But the tech-laden Nasdaq, dragged down by microchips, suffered a bigger loss, falling 2.6% following a series of high-profile AI-related results.
The blue chip Dow made a nominal gain minutes before the closing bell.
Meta Platforms’ results beat analysts’ expectations, but its stock slipped 7.0% as Facebook’s parent company posted its first cash outflow in more than a decade due to its AI spending and announced plans to issue non-voting shares in a two-for-one deal to raise capital to devote to the nascent technology.
Tesla shares fell 3.1%, even though the electric car maker unexpectedly posted positive free cash flow in the quarter and reduced its capital spending plans for 2026.
The Philadelphia SE Semiconductor index, which is driving much of the gains in the current bull market, plunged 6.7%, its biggest daily percentage decline since June 23.
With Thursday’s decline, SOX is down more than 26% from its June 22 closing high, but it remains up 51.5% so far this year. The S&P 500 rose 11.9% over the same period.
“It’s a wonderful day on Wall Street,” said Paul Nolte, senior wealth advisor and market strategist at Murphy & Sylvest in Elmhurst, Illinois. “The only part of the market that’s really suffering here is technology, which was the golden child of the markets until about June.”
“Investors are starting to realize that there are gaps in the AI story,” Nolte added. “And that impacts the indexes because they are very heavily technology-driven.”
On the geopolitical scene, the Houthis, supported by Iran, launched new strikes against Saudi targets, propelling crude prices to their highest level in five months. Investors feared that ongoing conflicts in the Middle East would keep inflation high and force the U.S. Federal Reserve to continue raising interest rates.
Data from the Labor Department showed that initial claims for unemployment benefits continued to drift near their lowest levels in several decades. Signs of stability in the labor market will allow the Fed to focus on fighting inflation. Financial markets are currently pricing in the likelihood that the central bank will raise its key rate by an additional 25 basis points before the end of the year.
The Dow Jones Industrial Average rose 11.89 points, or 0.02%, to 52,867.98, the S&P 500 lost 93.74 points, or 1.21%, to 7,663.43 and the Nasdaq Composite lost 694.00 points, or 2.60%, to 26,008.86.
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