Nasdaq 100 Faces $2 Trillion Loss as AI Spending Worries Grow

The Nasdaq 100 lost more than 5.8% in October, and the index may shed over $2 trillion in market value as investors doubt that massive spending on artificial intelligence will deliver returns fast enough.

Hyperscalers such as Meta Platforms, Alphabet and Amazon.com have raised their spending forecasts in the race to expand AI infrastructure. Rising borrowing costs make debt-financed investment more expensive and harder to justify, which is what worries markets most.

Alphabet and Meta under pressure

Alphabet recorded its largest one-day percentage drop on record after weak results in its core advertising business and a sharp jump in cash burn. Meta's plan to raise a record $97.5 billion triggered concerns about shareholder dilution. Microsoft, by contrast, reported results indicating that its AI spending is beginning to produce tangible benefits.

Microsoft intends to raise about $25 billion in its first US investment-grade bond sale in more than nine years. Meta, Amazon and Alphabet have issued hundreds of billions of dollars in bonds over the past four years, raising fears of overreliance on this source of capital. Morgan Stanley forecasts that total capital expenditure on AI infrastructure will exceed $1 trillion next year. Growing dependence on debt is emerging as a new risk, and companies previously resilient to macroeconomic pressure are starting to feel the cost of credit.

Demand remains strong

Despite uncertainty over the timing of returns, revenues at the "Magnificent Seven" have stayed strong since ChatGPT's debut in 2022, pointing to persistent demand. Amazon's cloud services accelerated, Meta reported better-than-expected revenue growth, and Microsoft also announced strong cloud growth.

The AI boom, however, is propped up by unprecedented capital outlays. J.P. Morgan estimates global AI capex will reach $5.5 trillion by 2030, with as much as $900 billion spent in 2026 alone.