Nasdaq Ends Worst Month Since March 2025 as Intel Falls 28.6% and S&P Cuts Meta Outlook to Negative

Since the Nasdaq and S&P 500 hit record highs earlier this month, the AI trade has gone from cheered to cross-examined. Friday, Oct. 30, was the last trading day of October, and it was ugly.

The Nasdaq Composite fell 2.86% and the S&P 500 dropped 1.82%. Both had their worst day since June. The Dow lost 572 points, about 1.1%.

The Nasdaq is now down 7.8% from its record high earlier this month and suffered its worst monthly decline since March 2025. The S&P 500 is down roughly 3% from its peak.

Intel, Alphabet and the chip sector

Intel fell 28.58% on Friday, its worst day since 1974 and the second-worst on record. The company issued weaker guidance for the fourth quarter and cited weakness in the PC market, saying higher memory chip costs are hurting consumer demand. Despite the plunge, Intel shares are still up 78% this year.

Amazon slid 1.4% after an earnings report that indicated further increases in AI spending while its sales and profit missed analysts' expectations. Nvidia fell 4.2%. A closely watched index of chipmakers sank 7.2%.

The damage started Thursday. Alphabet sank more than 12%, wiping half a trillion dollars off its market value, on concerns about a slowdown in its search advertising business and a ramp-up in AI spending. Another 1.4% decline Friday capped off its worst month on record.

S&P puts Meta on negative outlook

Late Friday, S&P Global cut its outlook on Meta to negative from stable. It maintained the rating at AA-.

S&P cited negative cash flow and uncertainty around capital expenditure plans. It sees Meta's capex reaching $140 billion this year, topping $225 billion in 2027 and hitting $252 billion in 2028, then flattening out from there.

The agency expects free operating cash flow to remain negative: -$22 billion this year, -$71 billion in 2027, and -$39 billion in 2028.

S&P warned that Meta's leverage could top 1.0x as soon as 2027, the downgrade threshold for the current rating, up from about 0.1x in 2025. The agency said the increase primarily reflects Meta's strategy of leasing data center capacity rather than its debt issuance. It also said Meta's ability to monetize its AI investments is more limited than that of its peers, noting that rivals are monetizing their data centers by leasing compute capacity.

A Meta spokesperson told Fortune the company disagrees with S&P's assessment, pointing to "significant product and business opportunities" ahead.

Meta is not borrowing alone. Fortune reports Meta announced plans to raise $95 billion in equity this past week. In the same stretch, Elon Musk said SpaceX closed $40 billion in debt financing, and Microsoft raised $25 billion in a bond sale.

OpenAI, meanwhile, slashed the target on its latest fundraising round to $20 billion from $30 billion, sources told the Financial Times, cutting its expected valuation to $1.25 trillion from $1.4 trillion.

The case that the selloff is overdone

Not everyone reads this as a reckoning. Jay Goldberg, a senior analyst at Seaport Research Partners, told Al Jazeera the swings in the market appeared to be driven more by sentiment than underlying fundamentals. "In short, nothing has changed. Investors have just decided to be afraid this week," he said.

There is data on that side. Microsoft reported strong cloud growth and stayed cash flow positive, though it said capital spending will accelerate. SK Hynix blew away earnings forecasts. Anthropic's S-1, filed Monday, showed revenue has soared and its cash flow turned positive in the first half of this year.

Paul Stanley of Arca said, "The AI trade is down, but not out," adding that pullbacks are par for the course. Market veteran Ed Yardeni said further AI jitters could set up buying opportunities rather than signal the end of the boom.

The other view comes from portfolio managers. Joe Tigay of Equity Armor Investments said, "We're moving out of the hopes and dreams phase of the AI trade and into the 'show me' phase." He said investors want to see who can turn demand into earnings and generate cash.

Matt Maley, chief strategist at Miller Tabak + Co, said Alphabet's promise of returns from AI "is getting pushed even further down the road."

Other pressure on the market

AI spending is not the only worry. CNN reports markets were also rattled this month by concerns about higher interest rates and weaker-than-expected earnings and forecasts. Bitcoin also fell more than 4% over the past day, hitting its lowest level in more than a month, after the world's largest crypto exchange was hit by the biggest heist on record.

Oil has been a factor too. Al Jazeera reported that Brent crude futures rose above $114.20 a barrel on Oct. 23, the highest since May, with prices rising since February because of the fallout from the US-Israel war on Iran.

Alphabet, Microsoft, Meta and Amazon are collectively spending hundreds of billions of dollars on building data centers. Meta disclosed a quarter of negative free cash flow last week for the first time since 2012, and Amazon announced negative free cash flow of $42.4 billion over the past 12 months. Alphabet posted two quarters of negative free cash flow for the first time on record. The S&P outlook change shows rating agencies are starting to price that in, and shareholders are weighing it too.

What comes next

Anthropic is preparing to go public next month, according to Fortune's account of the Financial Times reporting, and its first public trading will test whether investors still pay up for AI growth that comes with positive cash flow.

Meta's rating is the nearer test. If S&P's leverage projection of 1.0x arrives as soon as 2027, the AA- rating would be at its downgrade threshold.