Nasdaq Plunges as AI Spending Concerns Erase Trillions

The Nasdaq Composite fell 2.6% on Thursday, marking its steepest daily decline since June and erasing nearly $1.2 trillion in market capitalization. The sell-off was driven by growing investor skepticism regarding the return on investment for artificial intelligence infrastructure. Meta Platforms shares tumbled 7% after the company reported its first cash outflow in over a decade, while Tesla cut its 2026 capital expenditure forecast. CoreWeave also saw its stock plunge to post-IPO lows as its bond yields reached 15%.

The downturn triggered a broader market contagion. The Philadelphia Semiconductor Index dropped 6.7%, and the S&P 500 fell between 1.2% and 1.5%. The volatility extended to Asian markets, wiping out $600 billion across eight regions, including a 4% crash in South Korea's Kospi and a 2.6% drop in Japan's Nikkei. Goldman Sachs reported that hedge funds suffered their worst single-day performance since 2011.

Investors responded by rotating into defensive sectors and government bonds. The 10-year U.S. Treasury yield saw its largest daily decline since March 2023, dipping below 5% for the first time in a month to reach 4.95%. This shift benefited homebuilder stocks, with the State Street SPDR S&P Homebuilders ETF rising 3.8%. Meanwhile, Brent crude oil prices hit a five-month high above $114 per barrel following Houthi attacks in Saudi Arabia. Amid these pressures, investors now price in a 93% probability that the Federal Reserve will hold interest rates steady at 375-400 basis points during its next policy decision.