On Thursday, October 22, market sentiment shifted rapidly from the optimism generated by strong earnings the previous day to a scrutiny of whether massive AI capital expenditures can deliver returns, compounded by Middle East tensions pushing oil prices higher and rising risk aversion, putting tech stocks under multiple pressures. The US AI trade suffered repeated blows, with chip stocks, optical communications, AI cloud computing, and server supply chains all falling collectively, while Meta Platforms Inc (NASDAQ: META) was also sold off due to cost and financing concerns triggered by increased AI investment.
Chip stocks bore the brunt of the selling. The Philadelphia Semiconductor Index (SOX) and the semiconductor industry ETF SOXX, which had rebounded about 2% on Wednesday, both fell more than 6% in early trading on Thursday. Among individual stocks, NVIDIA Corp (NASDAQ: NVDA) dropped more than 4% at one point, Advanced Micro Devices Inc (NASDAQ: AMD) fell about 8%, Lam Research Corp (NASDAQ: LRCX) declined more than 10%, and KLA Corp (NASDAQ: KLAC) dropped over 9%; memory chip, optical communications, and AI cloud computing sectors all suffered broad declines.
Meta Platforms Inc (NASDAQ: META) fell more than 7% intraday, as the company's five-year credit default swap (CDS) price rose to a record high, highlighting investors' concerns about the scale of AI investment, future financing needs, and the return cycle.
The core of this selloff is that the market has begun to reassess the costs, financing pressures, and return cycles of the AI investment boom. Meta's third-quarter revenue and profit both exceeded expectations, yet it further raised its full-year capital expenditure guidance and disclosed that future spending commitments have risen to $825 billion; Lam Research, meanwhile, triggered market concerns about the pace at which semiconductor equipment companies can deliver growth due to supply constraints.
At the same time, an attack on Saudi Arabia pushed Brent crude above $110 per barrel, bringing energy costs and inflation risks back into focus. The uncertainty of AI investment returns, supply chain constraints, and geopolitical risks intertwined, prompting investors to reduce exposure to highly valued tech assets and shift toward relatively safe bonds.
Chip Leaders Fall Broadly, Equipment Stocks Lead Supply Chain Decline
The semiconductor sector retreated sharply on Thursday, with chip design, manufacturing, equipment, and memory stocks under almost universal pressure. Broadcom Inc (NASDAQ: AVGO) fell 4.5% at one point, Marvell Technology Inc (NASDAQ: MRVL) dropped nearly 9%, Intel Corp (NASDAQ: INTC) declined nearly 7%, and Taiwan Semiconductor Manufacturing Co (NYSE: TSM) fell nearly 4.5%.
Semiconductor equipment stocks saw even steeper declines. In addition to Lam Research and KLA, which fell at least 9% intraday, Applied Materials Inc (NASDAQ: AMAT) dropped about 7.5%. Among memory chip stocks, SK Hynix Inc (OTC: SKHY) fell more than 6% at one point, SanDisk Corp (NASDAQ: SNDK) declined nearly 7%, Micron Technology Inc (NASDAQ: MU) fell 4.6%, Western Digital Corp (NASDAQ: WDC) dropped more than 7%, and Seagate Technology Holdings PLC (NASDAQ: STX) declined nearly 9%.
Optical communications and AI infrastructure-related stocks were also sold off. Credo Technology Group Holding Ltd (NASDAQ: CRDO) fell nearly 10% in early trading, Coherent Corp (NYSE: COHR) dropped more than 10%, Lumentum Holdings Inc (NASDAQ: LITE) fell 10%, and Corning Inc (NYSE: GLW) declined more than 8%. AI cloud service provider CoreWeave Inc (NASDAQ: CRWV) fell nearly 9% at one point, Nebius Group NV (NASDAQ: NBIS) dropped more than 6%; intraday, Dell Technologies Inc (NYSE: DELL) fell nearly 8%, Super Micro Computer Inc (NASDAQ: SMCI) declined nearly 7%, and Oracle Corp (NYSE: ORCL) dropped more than 3%.
The broad decline across supply chains indicates that market concerns have expanded from the valuation of individual chip companies to the entire AI infrastructure investment chain. The growth expectations of chip designers, equipment suppliers, memory manufacturers, optical communications companies, and cloud service providers are all closely tied to the ability of large tech companies to continue investing in AI infrastructure. Once investors begin to question the speed of returns on spending, related assets may come under simultaneous pressure.
Meta Raises Capital Expenditure, $825 Billion Future Spending Commitment Sparks Financing Concerns
Meta became another focal point of AI trade pressure on Thursday. The company's third-quarter revenue grew 26% year-over-year to $64.6 billion, exceeding market expectations; earnings per share were $3.83, also above analysts' estimates of $3.57. But strong current-quarter results failed to dispel market concerns about future investment costs, and Meta's stock fell more than 7% in early trading.
Meta raised its 2026 capital expenditure guidance to $135 billion to $145 billion, increasing the lower end of its previous guidance range from $130 billion. The company disclosed that future spending commitments, including leases, computing transactions, and energy agreements, have risen to $825 billion.
The market's focus is shifting from whether AI businesses can grow to how much capital growth requires and when sufficient returns can be generated. Meta CEO Mark Zuckerberg said the company's investments are yielding results, the core business remains strong, and products such as the AI assistant Muse show growth potential. But the company also acknowledged that the return cycle for some new AI investments will be longer than for the core business.
Meta's credit risk indicators also deteriorated. Bloomberg data showed that Meta's five-year CDS price rose about 8.9 basis points intraday to around 119.3 basis points, a record high. A rise in CDS prices means higher hedging costs for investors against related debt default risk, reflecting the market's increased caution about the company's expanding AI investments and potential financing needs.
Meta also announced it would distribute a new class of non-voting shares to existing shareholders, which could be used in the future for financing, employee compensation, and potential acquisitions. This arrangement further raised market attention on how the company will fund its AI expansion.
Next, Google parent Alphabet, Microsoft, and Amazon will successively report quarterly results. These large tech companies' earnings will not only test whether AI demand continues but also reveal whether capital expenditures continue to accelerate and whether companies can gradually prove that spending is translating into revenue, profit, and cash flow. For the market, the key to the AI trade is no longer just how fast demand is growing, but also whether the scale of spending is sustainable.
Lam Research Supply Constraints, Equipment Stock Growth Expectations Reexamined
Lam Research became one of the biggest decliners in the semiconductor equipment sector. After the company reported quarterly results, its stock fell more than 10% in early trading. The company's outlook for the next phase and supply constraints made investors more cautious about industry growth expectations.
According to reports, after the earnings release, Lam Research management said that without recent supply constraints, the company's guidance could have been higher. Supply constraints mean that even with strong AI-related chip demand, equipment companies may not be able to deliver products and recognize revenue at the expected pace. This has led the market to reassess whether strong orders can be converted into actual results in a timely manner.
The valuation of semiconductor equipment companies is highly dependent on wafer fab expansion and advanced process investment. Previously, AI data center construction drove chip demand growth, prompting wafer fabs to increase capacity and supporting equipment companies' orders and stock prices. But limited equipment deliveries, or adjustments to customer expansion plans, could affect revenue recognition in the coming quarters.
Peer stocks such as Applied Materials and KLA also fell sharply, indicating that investors did not limit the problem to Lam Research alone. The equipment sector had previously benefited from AI capital expenditure expectations, and stock prices were highly sensitive to future growth; when the market begins to worry about supply bottlenecks, capital expenditure pace, and valuation levels, related stocks are prone to amplified pullbacks.
However, supply constraints do not mean AI chip demand has weakened. What is more noteworthy now is whether equipment makers can alleviate delivery bottlenecks and whether large tech companies' data center investments can continue to support wafer fab expansion. Subsequent earnings and management guidance will help the market determine whether this round of adjustment is a correction of valuations and positioning, or whether AI supply chain growth expectations are beginning to change.
Brent Crude Breaks Above $110, Inflation and Risk Aversion Pressures Intensify
As the tech stock selloff occurred, international oil prices also rose due to escalating Middle East tensions. Media noted that Brent crude rose above $111 per barrel, and a deadly attack on Saudi Arabia intensified market concerns about the expansion of the Middle East conflict and disruptions to energy supply.
Rising oil prices not only increase cost pressures on the global economy but may also push up inflation expectations, raising market concerns that the Federal Reserve and other central banks will have limited room to cut rates. At the same time, AI infrastructure construction itself requires substantial capital, electricity, and equipment, and rising energy prices and financing cost pressures could further affect investment return calculations.
In this environment, funds tend to shift from highly valued, growth-sensitive tech assets to relatively safe government bonds. Media noted that global stocks came under broad pressure on Thursday as investors readjusted positions between AI growth prospects and escalating Middle East risks; US Treasuries received safe-haven buying support, with yields falling.
For AI concept stocks, this creates dual pressure: on one hand, the market demands that companies prove massive investments can deliver returns; on the other hand, rising oil prices and potential interest rate pressures may raise future investment costs and compress valuation space.
The broad decline in chip stocks on Thursday shows that the AI trade has entered a phase that places greater emphasis on earnings delivery, capital efficiency, and financing sustainability. Strong demand remains an important support for the industry, but demand growth alone is no longer enough for all supply chain companies to sustain valuation premiums. In the coming weeks, large tech companies' earnings, capital expenditure plans, and chip equipment companies' outlooks on supply chains and orders will be key to judging whether the AI trade can stabilize.
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