All three major US stock indexes fell collectively in early trading on October 23, as pressure on AI infrastructure financing and continuously rising international oil prices weighed on market risk appetite.
As of 10:16 AM Eastern Time, the Dow Jones Industrial Average dropped 683 points, or 1.3%; the S&P 500 fell 45 points, or 0.6%; and the Nasdaq Composite declined 58 points, or 0.2%. Previously, the Nasdaq plunged 2.6% on Thursday, marking its largest single-day drop since June.
Although some AI-related stocks showed signs of stabilizing on Friday, Brent crude rose to $115 per barrel for the first time since May, intensifying market concerns about energy inflation and the Federal Reserve's monetary policy outlook.
AI financing pressure has become a market focal point, with Jensen Huang warning of insufficient capital supply. The core reason behind the recent tech stock selloff is that investors are beginning to question whether AI companies can continue to secure sufficient funding to support ever-expanding data center and computing infrastructure construction.
Meta Platforms announced this week the establishment of a new non-voting Class C stock, providing more options for raising AI investment funds in the future, which triggered market concerns about large-scale equity financing and dilution of existing shareholders' rights.
As some large tech companies see negative free cash flow and future borrowing costs may rise, the market expects more companies may need to raise funds through stock issuance. Meta's stock price hit its largest single-day drop since July on Thursday and continued to face pressure in early trading on Friday.
Nvidia CEO Jensen Huang also warned in a recent interview that AI infrastructure construction is facing a capital shortage, and the industry's funding needs far exceed currently available capital.
Yardeni Research analysts noted that the market had previously been mainly concerned about rising financing costs for AI companies and whether massive investments could generate sufficient returns; now, a new question is emerging: whether capital markets have enough funds to support all companies' AI expansion plans.
Vital Knowledge analysts believe that in the short term, investor sentiment and positioning toward the AI sector have clearly turned pessimistic, which could create conditions for a rebound in related stocks. However, the firm also pointed out that the AI industry has entered a new phase where capital market financing conditions are no longer as accommodative as before.
Brent Crude Touches $115, Middle East Supply Risks Rekindle Inflation Concerns
Rising energy prices further added pressure on US stocks. On October 23, Brent crude extended its gains, touching $115 per barrel during intraday trading, reaching this level for the first time since May this year.
The market is concerned that escalating geopolitical tensions in the Middle East could disrupt regional energy supplies that had just shown signs of recovery. Previously, the gradual resumption of some crude oil shipments in the Persian Gulf had somewhat alleviated market concerns about supply shortages. However, as the risk of regional military conflict rose again, traders once again heightened vigilance against energy supply disruptions.
Continued oil price increases could pass through gasoline, diesel, and transportation costs to overall prices, adding to US inflation pressure. Despite the notable rebound in energy prices, the market currently still expects the Federal Reserve to keep interest rates unchanged at next week's policy meeting.
The Fed previously implemented its first rate hike since 2023 in September, and some officials have recently downplayed the need for an immediate rate increase, while still emphasizing the need to bring inflation down to the 2% target level. The market expects the Fed may raise rates again at its final meeting of the year in December.
Treasury Yields Edge Higher, French Bond Market Pressure Persists
The US Treasury market also saw changes on Friday. The previous day, driven by the sharp decline in AI-related tech stocks, investors flocked to US Treasuries for safe haven, pushing the 10-year Treasury yield to its largest single-day drop since March 2023. On Friday, as some tech stocks stabilized, the 10-year Treasury yield edged slightly higher.
Meanwhile, the French government bond market remains affected by domestic unrest and fiscal conditions. Recent social turmoil in France has continued, with investors worried that increased public spending could further weigh on the government's fiscal pressure. French government bond yields fell back on Friday after a sharp rise on Thursday, with the bond market temporarily stabilizing.
The divergent performance of US and French bond markets reflects that investors are simultaneously assessing AI industry risks, rising global energy prices, and the fiscal credit conditions of certain countries.
Western Digital Falls Despite Earnings Beat, AI Hardware Sector Faces Repricing
On the individual stock front, Western Digital fell more than 1% in early trading on Friday, despite the company previously reporting first-quarter fiscal 2027 results and second-quarter guidance that both exceeded Wall Street expectations. Driven by rapidly growing demand for large-scale data storage from AI systems, Western Digital's stock has risen more than 86% year-to-date.
However, the company warned on its earnings call about rising input costs and increased future capital expenditures, prompting investors to reassess its margin and cash flow prospects. Western Digital initially rose after the earnings release but then turned lower, indicating that even as AI-related companies maintain strong growth, the market's sensitivity to cost pressures and investment returns is increasing.
Overall, Friday's downward pressure on US stocks came mainly from two sources: first, the continuously expanding scale of AI infrastructure investment is forcing tech companies to face higher external financing needs; second, international oil prices rose to a five-month high, adding uncertainty to inflation and interest rate outlooks. Although some AI stocks have seen their declines moderate, the market's reassessment of the industry's financing capacity and long-term profitability returns continues.
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