Nasdaq Falls 2.6% as AI Spending Worries and Mideast Tensions Hit Stocks

U.S. technology stocks fell sharply Thursday, Oct. 22, as concern over artificial-intelligence spending collided with renewed Middle East tensions. Investors moved into government bonds while rising oil prices added another complication to the corporate earnings season.

The Nasdaq Composite dropped 2.6%, its steepest decline since June, and the S&P 500 lost 1.2%. The Dow Jones Industrial Average edged higher, according to The Wall Street Journal’s closing coverage, underscoring the uneven impact of the technology selloff across major indexes.

Meta Platforms was a prominent source of pressure, falling 7% after its quarterly report. Reuters reported that revenue exceeded expectations, but plans to issue non-voting stock revived concerns about the company’s financial commitments and the broader cost of building AI infrastructure.

The weakness spread through businesses supplying that expansion. A semiconductor index fell 6.7%, Reuters reported, showing how quickly doubts about spending by large technology companies can reach the chipmakers whose growth depends partly on those investments.

Tesla shares also declined, closing down 3.1% after the company reported earnings and lowered its spending forecast, according to Reuters. Tesla confirmed that it released its third-quarter financial update on Wednesday, Oct. 21, and scheduled a management webcast to discuss the results and outlook.

The automaker’s figures presented a mixed picture. The Associated Press reported quarterly net income of $787 million, down 44% from a year earlier, while adjusted earnings of 48 cents a share exceeded analyst expectations. Free cash flow reached $1.5 billion, but the company reduced its full-year capital spending estimate from $25 billion to $20 billion.

Energy markets supplied a separate source of uncertainty. Brent crude reached a five-month high following Houthi attacks in Saudi Arabia, Reuters reported, as traders assessed the possibility of further disruption to supplies from a major exporting region. That concern accompanied, rather than replaced, the earnings-driven pressure on equities.

Higher energy costs matter beyond oil producers because they can raise transportation and operating expenses. In its Thursday morning commentary, Charles Schwab highlighted company reports describing energy costs as a burden, including those from United Airlines and Philip Morris. The brokerage also pointed to costly shipping as another pressure facing businesses.

The simultaneous demand for Treasurys showed investors seeking protection even as oil climbed. Bond prices rise when yields fall, so the move reflected a different response from the selling in technology shares. It also left markets balancing immediate demand for safety against the potential economic consequences of more expensive energy.

The next major scheduled tests include central-bank decisions and further assessment of corporate earnings guidance. Schwab identified the following week’s Federal Reserve, European Central Bank and Bank of Japan meetings as potential drivers of bond yields. Its outlook points to a market still sensitive to both financing conditions and developments in energy supplies.