AI Spending Panic Wipes $1 Trillion Off Nasdaq as Investors Flee to Bonds
Tech stocks suffer worst sell-off since June as doubts grow over whether massive AI investments will ever pay off.
Global stock markets tumbled this week as investors questioned whether the massive spending on artificial intelligence (AI) by major technology companies will generate sufficient returns, triggering a broad sell-off that wiped hundreds of billions of dollars off major indexes [268742][268793].
The tech-heavy Nasdaq fell 2.6% in its worst session since June, with Meta Platforms and Tesla leading declines among mega-cap technology names [268742][268783]. The sell-off reflected growing concern that AI spending is outpacing earnings, with investors particularly worried about whether hyperscalers — the largest cloud and data-center operators — will earn enough to justify their investments [268885][268793].
The losses extended beyond stock markets. Six of the world's richest people, including Elon Musk, Jeff Bezos, Mark Zuckerberg, and Larry Page, lost a combined $130 billion on Thursday as technology share prices fell across the board [268828]. Investors worry that heavy spending on AI — the technology that powers tools like chatbots — may not yet be paying off [268828].
As fear spread through markets, investors rushed toward safer assets. Treasury yields posted their biggest drop since 2023, signaling a flight to safety [268783]. The 10-year Treasury yield had its biggest one-day drop since Silicon Valley Bank collapsed, while CNN's "Fear & Greed" index now shows extreme fear among investors [268773]. Japanese government bond yields also fell across all maturities as the stock selloff pushed investors toward safer assets [268883].
The pain was felt globally. European stock indexes fell sharply as trading opened, pressured by higher oil prices and weakness in technology shares [268797]. South Korean stocks declined as major chipmakers fell, tracking the overnight selloff in US technology shares [268881]. Japanese stocks fell in early trading Friday, with the Nikkei index down 2.2% as investors worried about rising energy costs pressuring chip and bank stocks [268794].
In China, a selloff in AI model developer stocks showed no sign of stopping, with shares losing $150 billion in value as competition in the sector intensifies [268866]. CoreWeave, an AI cloud computing company, saw its shares fall 36% in October, with its credit default swaps widening — a sign that investors see more risk in its debt [268768].
Gold also fell below $4,000 an ounce, hitting its lowest level in more than three months, as investors sold the traditional safe-haven asset to cover losses elsewhere [268875].