Nasdaq Crashes 2.6% as AI Spending Fears Spark a Tech Selloff on Wall Street

Wall Street suffered its worst tech rout in months on Thursday as the Nasdaq Composite plunged 2.58% to 26,008.86 — its biggest one-day fall since June — after investors turned against the massive spending race behind artificial intelligence. The S&P 500 fell 1.19% to 7,664.77, while the Dow Jones Industrial Average finished almost flat, up just 0.03% at 52,873.60, underlining that the pain was concentrated in technology.

Key Facts

• Nasdaq Composite: −2.58% at 26,008.86 (worst day since June)
• S&P 500: −1.19% at 7,664.77 | Dow Jones: +0.03% at 52,873.60
• Philadelphia Semiconductor Index sank 6.7% — its steepest drop since June 23
• Chip stocks hammered: AMD −8.1%, Intel −8.0%, Micron −6.3%, Nvidia −4.4%, Broadcom −4.3%
• Meta fell nearly 7%, Amazon −4.6%, Tesla −3.1%, Microsoft −2.2%; Apple rose 1.2%
• The 10-year Treasury yield dropped below 5% to about 4.97% as investors rushed into bonds

Why did tech stocks fall so hard?

The trigger was earnings season itself. Meta and Tesla both reported numbers that were broadly solid, yet investors focused on one thing: the cost of the AI boom. Meta raised its full-year capital spending outlook to as much as $135–145 billion, while Tesla cut its 2026 spending plan — two opposite moves that raised the same question: are the hundreds of billions pouring into AI data centers actually earning their keep?

Chipmakers, the biggest winners of the AI trade, took the heaviest beating. When the companies buying the chips signal caution, the companies selling them fall first — and the semiconductor index's 6.7% slide dragged the whole Nasdaq down with it.

Why did the Dow barely move?

The Dow holds only a handful of the mega-cap tech names driving the selloff. Defensive sectors actually gained — consumer staples rose about 3.1% and utilities nearly 2% — as money rotated out of growth stocks and into safer corners of the market. Post-earnings winners such as Spotify (+11%), Lockheed Martin (+7%) and Procter & Gamble (+5.5%) also cushioned the index.

What are investors watching next?

Three things will decide whether this is a one-day scare or the start of a deeper correction: Friday's flash PMI data for a read on growth, next week's central-bank decisions led by the Federal Reserve, and whether oil — Brent crude is above $113 a barrel, its highest since May — keeps fueling inflation fears. The VIX fear gauge jumped about 14% to 19, a sign that hedging demand is back.

FAQ

How far is the Nasdaq from its record high?
After Thursday's fall, the Nasdaq sits about 5.8% below its all-time high reached on October 6.

Is this the end of the AI rally?
Analysts are split. Bulls say spending discipline is healthy; bears warn that if AI investment slows, the suppliers who powered the bull market face a painful reset. Friday's session and next week's Fed decision will set the tone.