Nasdaq 100 closes in correction as AI spending fears mount

The Nasdaq 100 fell into a correction on Monday, Nov. 2. Investors are growing more doubtful about Big Tech's spending on artificial intelligence. The index fell 1.4% to close at 27,989.82, more than 10% below its Oct. 6 peak. That is the usual definition of a correction, and it is the index's third of 2026, Bloomberg reported. The index is still up 11% for the year.bloomberg.com

The drop followed a rough end to October. On Friday, Oct. 30, the index fell 3.46% to 28,384.85 and briefly traded in correction territory during the session. The Nasdaq 100 lost about 6.5% in October, its worst month since March 2025.tradingview.com+1

Earnings and borrowing weigh on tech

Barron's News Corp ↗ 4.15% pointed to three causes. Megacap results from Alphabet ↗ 3.25%, Meta Platforms ↗ 1.44%, Microsoft ↗ 6.68% and Amazon Amazon.com, Inc. ↗ 6.12% were mixed. Capital costs are rising with their AI plans. And it is still unclear how that spending will turn into profit. Alphabet lost about $500 billion in market value in one day after saying AI search was cutting into its advertising business. Intel ↘ 3.77% plunged 28.6% on Friday after giving a weak fourth-quarter outlook.barrons.com+2

Borrowing is a growing worry. The tech sector has taken on $655 billion in new debt this year. Oracle ↘ 1.95% said on Monday it plans a $20 billion bond offering and a $10 billion stock sale. Melius Research's Ben Reitzes said the largest AI companies "have to issue hundreds of billions in securities" to "fund a multi-trillion buildout in an inflationary environment." The PHLX Semiconductor Index ↘ 3.12% has fallen nearly 28% from its June high, which puts it in a bear market.barrons.com

Rotation ahead of the midterms

Investors moved money out of tech and into other sectors on Monday. The Dow Jones Industrial Average gained while tech stocks slid. Morgan Stanley ↗ 4.23% said the selloff had been building beneath a calm-looking market. The bank pointed to three drivers: the midterm elections, worries about AI spending and thin liquidity. In October, the equal-weighted S&P 500 ↗ 1.65% beat the standard index by the widest margin since April 2009. Prediction markets give Democrats about a 70% chance of winning the midterms, which could bring tighter regulation of Big Tech.fxstreet.com+1

Analysts disagree on what comes next. Deutsche Bank ↗ 7.93% raised its rating on the tech sector back to Overweight on Friday, saying the slump offers a good entry point. Citigroup ↗ 1.65% said investors are underestimating AI revenue growth at the largest cloud companies. The next tests come soon. Apple ↗ 5.31% reports earnings after Monday's close. The midterm elections are on Tuesday, and Advanced Micro Devices ↗ 1.01% and Broadcom ↘ 2.00% report later this week.investopedia.com+1

"Investors are increasingly concerned about the AI trade, and the more capex keeps growing, the more risks loom," said BofA Global Research's Claudio Irigoyen.barrons.com