Wall Street ended October with a brutal selloff, wiping roughly $2 trillion from the Nasdaq-100’s market value as investors questioned whether the artificial intelligence boom could justify its enormous costs.
The damage was concentrated in technology stocks. Intel collapsed nearly 29% on Friday, Reddit fell 29%, and Google parent Alphabet lost more than $500 billion in market value on Thursday alone.
China’s AI bubble burst last week, crashing most of its tech stocks. Is the same pattern now unfolding on Wall Street?
Why Did the US Stock Market Crash?
The immediate trigger was disappointing corporate earnings. Several major technology companies revealed how much money they were spending on AI, while others warned of slowing growth.
Investors were already nervous about elevated stock valuations. Growing inflation and indications that the Fed will increase interest rates in December added pressure.
Google: AI Spending Is Eating Into Cash
Alphabet shares lost nearly 13% during the week after its quarterly results disappointed investors.
The company reported $9.1 billion in negative free cash flow as AI infrastructure spending accelerated. Its core search advertising business also missed expectations.
Investors are now questioning how quickly Google’s enormous AI investments will generate enough cash to justify their cost.
Amazon: $220 Billion in Spending
Amazon faces a similar problem.
Despite AWS cloud revenue growing 39%, Amazon reported negative free cash flow of $42.4 billion over the preceding 12 months.
The company expects capital expenditure of approximately $220 billion this year, with even more spending anticipated in 2027.
Intel: A Factory Disaster and Falling Demand
Intel’s collapse had more immediate causes.
An explosion at its Israeli manufacturing facility disrupted production, with an estimated $600 million revenue impact over two quarters.
Meanwhile, rising memory prices weakened PC demand. Intel’s fourth-quarter revenue forecast fell substantially below Wall Street expectations, triggering its steepest daily share-price decline in decades.
Reddit and Software Stocks: AI Threatens Existing Businesses
Reddit lost more than 36% over the week after warning that Google’s AI-generated search answers were reducing traffic to its platform.
Enterprise software companies suffered their own selloff. ServiceNow fell approximately 34% for the week following disappointing earnings and a weaker backlog-growth outlook. Cybersecurity company Fortinet lost around 24% after cutting its services-revenue forecast.
Investors increasingly fear AI could undermine parts of the traditional software business.
Is the AI Bubble Starting to Burst?
There are credible warning signs.
Technology companies are spending hundreds of billions on infrastructure before the full financial returns are clear. JPMorgan expects global AI capital expenditure to reach $900 billion in 2026 alone.
The concern is whether AI revenue can grow fast enough to cover these investments, particularly as companies increasingly borrow money to finance expansion.
However, the underlying businesses continue growing. Microsoft reported strong cloud demand, while Google’s cloud revenue more than doubled.
The current evidence points to an AI valuation correction. A sustained collapse in AI investment would provide stronger evidence of a bursting bubble.
Will the Stock Market Keep Crashing?
Technical indicators suggest the selloff could continue, although history offers some perspective.
The Nasdaq-100 closed near 28,385, below its approximately 29,800-point 50-day moving average. Its 200-day average, near 27,900, is the next important level to watch.
A sustained break below that longer-term trendline could indicate deeper weakness. Recovering the 50-day average would improve the technical picture.
Historically, corrections are common. Fidelity data shows the S&P 500 has suffered declines of at least 10% in nearly half of calendar years since 1980, often without entering a prolonged bear market.
The market also remains divided. The S&P 500 finished the week down just 0.6%, while smaller companies in the Russell 2000 gained 1.3%.
For now, investors should watch whether AI spending forecasts begin falling, whether corporate earnings continue disappointing, and whether selling spreads beyond technology.
Upcoming earnings from AMD and Nvidia will be particularly important. They could reveal whether the AI infrastructure boom remains strong enough to support current valuations.
The next phase of this selloff will depend heavily on what those companies tell investors about demand.
