The Nasdaq Composite tumbled sharply on Friday while the Dow Jones Industrial Average held up comparatively well, as traders pulled money out of core artificial intelligence names and rotated into defensive corners of the market.
The tech-heavy Nasdaq sank 2.86%, its worst single-day performance since June, leaving the index roughly 8% below its recent high. The blue-chip Dow fell 572 points, or 1.1%, while the S&P 500 dropped 1.8%.
Selling pressure intensified in the afternoon: with the month winding down and next week's midterm elections clouded by uncertainty, investors chose to lock in gains and take profits.
Amazon.com (AMZN) reported third-quarter results that missed Wall Street expectations on both revenue and profit, sending its shares down more than 1%. The company posted negative free cash flow of $42.4 billion for the period while keeping its 2026 capital spending guidance unchanged at $220 billion.
As for Intel (INTC), shares plunged 29% after the chipmaker issued a weak outlook for the current quarter and warned of slowing PC demand. Revenue in its client computing and physical AI business segment fell 5% year over year to $8.1 billion.
SanDisk, meanwhile, fell 13% even though its first-quarter results beat market expectations; the storage company also announced a 1-for-8 forward stock split.
The chip sector came under broad pressure: Advanced Micro Devices dropped 11%, while Nvidia and Broadcom each fell 4% and 5% respectively.
As money rotated out of tech stocks, defensive sectors such as consumer staples and healthcare bucked the trend and closed higher. Walmart and Coca-Cola each rose more than 1%, partially offsetting the Dow's decline, while Dow components Merck and Amgen also advanced.
Keith Buchanan, senior portfolio manager at Globalt, said: "The market winds have shifted, and whether this round of style rotation can persist remains to be seen. The market right now is very cautious and selective. Last year the market was focused on expectations and imagination; this year the core questions come down to real-world execution: how the money gets raised, and who gets the profits. Those questions are far harder to answer." He added: "Real economy risks are genuinely there, and the market is pricing that in."
Bearish sentiment deepened further: British media, citing sources, reported that Blackstone told investors Anthropic might not secure an investment-grade credit rating after going public. Earlier in the week, Anthropic's filing of its S-1 IPO document had briefly lifted the AI trade, but selling pressure returned as Wall Street digested more tech earnings.
On the prior trading day, Thursday, Alphabet (GOOGL) posted its worst single-day performance on record: its third-quarter profit and revenue both missed expectations, with free cash flow at negative $9.07 billion. The sharp slide in the Google parent drove the Nasdaq down more than 1% during regular trading.
Friday marked the final trading day of October. The AI-driven theme swung violently this month, with investors paying close attention to each company's capital spending on computing infrastructure. Hyperscale cloud providers such as Google and Microsoft did not raise their capex forecasts. At the same time, the debt levels of neoclouds, cloud companies that specialize in supplying AI data center infrastructure, are coming under investor scrutiny. CoreWeave's bond yields spiked sharply, a prime example of that concern: the stock plunged more than 37% over the course of October, while Nebius also fell 33% this month. The Roundhill Memory Chip ETF, ticker DRAM, whose holdings include AI storage names such as Micron and Seagate, fell 20% in October, while the BlackRock iShares AI Innovation and Tech Active ETF, BAI, dropped 17%.
As traders prepared to close out October, the Nasdaq was on track for a monthly decline of 5%, its largest monthly drop since March 2025. The S&P 500 was expected to fall less than 1% for the month, while the Dow Jones Industrial Average was poised for a 2% monthly gain.
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