The Nasdaq 100 Index officially entered correction territory during Tuesday's session, marking a decline of more than 10% from its most recent record high. The technology-heavy benchmark finished the day 1% lower, with the latest wave of selling pushing the sector's market value loss to approximately $1.6 trillion over five trading sessions. This represents a dramatic acceleration from the previous correction threshold reached just 38 trading days ago, versus more than 100 sessions during the March decline. The benchmark reached the correction threshold in just 38 trading days, versus more than 100 sessions during its previous decline in March. This stark contrast highlights the accelerated nature of the current sell-off, with investors becoming increasingly concerned about the sustainability of massive AI spending across major technology companies. The decline comes as losses in semiconductor stocks deepen as signs of progress in China's advanced chipmaking industry compound worries about the sustainability of the artificial intelligence spending boom.
Last week saw Alphabet Inc. suffer its biggest one-day drop in more than a year as its results showed that the Google parent is spending so much that free cash flow turned negative for the first time in its history as a public company. The company also signaled a lot more spending going forward, which overshadowed a number of positives, including robust growth in its cloud-computing business. Three other major spenders on AI are due to report this week, with Microsoft Corp. and Meta Platforms Inc. due on Wednesday, and Amazon.com Inc. reporting Thursday afternoon. Selling accelerated after quarterly results from Alphabet and Tesla failed to reassure investors, with Alphabet falling 7% after raising its full-year capital expenditure forecast to more than $200 billion. "The AI trade is being looked at with a much greater degree of skepticism, and the shift in sentiment means it has become something of a one-way trade with things getting sold unmercifully," said Mark Luschini, chief investment strategist at Janney Montgomery Scott. "It's a negative feedback loop because there are a number of companies that once had very high free cash flow, but spending on AI has diminished that or even turned them cash-flow negative," Luschini added.
The weakness in semiconductor stocks has intensified with fresh selling pressure as chipmakers bore the brunt of the latest selloff. Shares of Sandisk fell 14%, while AMD, Arm Holdings, Micron Technology and Seagate Technology each dropped more than 8%. Dell Technologies, a major supplier of AI data centre servers, declined 8.1%, while Intel lost 5.8%. The Philadelphia SE Semiconductor index has plunged more than 25% from its June peak, with chipmakers leading declines of more than 30% in the likes of Qualcomm Inc., Sandisk and Marvell Technology Inc. since the Nasdaq 100's June 2 high. The selloff was even more pronounced in overseas markets, with South Korea's KOSPI index falling 10.8%, severe enough to trigger temporary trading halts in Seoul. Over the past five sessions, Sandisk, T-Mobile, Meta Platforms, Alphabet and Amazon have declined between 7% and 10%.
The selloff in technology shares knocked Nvidia from the top spot among the world's most valuable listed companies, allowing Apple to reclaim the position for the first time since April 2025. Nvidia had held the title of the world's most valuable listed company since June 2025 after overtaking Microsoft, and the chipmaker also briefly surpassed a $5 trillion market value in October. Despite the recent weakness, Nvidia shares are still up 4% this year, while Apple has gained 24%. Investors have favoured Apple's strategy of limiting direct spending on AI infrastructure by leasing computing capacity instead of investing heavily in its own facilities. While Nvidia continues to benefit from demand for AI processors, investor interest has broadened to include memory chips and other data centre components, with companies such as Micron Technology, SK Hynix and Sandisk also gaining from increased AI infrastructure spending.
Markets are preparing for a key week of earnings from major technology companies, with investors expected to closely watch capital spending plans from Meta Platforms and Amazon, which could influence the next move in technology stocks. Bloomberg estimates show Alphabet, Microsoft, Amazon and Meta are expected to spend about $724 billion on capital expenditure this year and nearly $950 billion in 2027. The recent decline reflects investor concerns over rising AI investment costs, weaker earnings and increasing capital expenditure across the technology sector. Apple, despite outperforming many of its peers, also faces challenges as higher demand for memory chips used in AI computing has increased costs, prompting the company to raise prices for products including MacBooks and iPads. The rapid expansion of AI infrastructure is also reshaping business models across the sector, with Alphabet reported negative cash flow in the second quarter despite generating substantial revenue, underscoring investor concerns about the financial impact of elevated AI spending.
