Key Highlights

● The Nasdaq-100 lost about $1.32 trillion, led by 26 AI and chip names.

● Nvidia shed about $235 billion and was the single biggest drag on the S&P 500.

● Consumer staples had their best day since April 2025 and closed at a record.

● The equal-weight S&P 500 rose even as the cap-weighted index fell 93.74 points.

"Every index on the planet is basically an AI index," one fund manager said on Thursday, October 22, as an AI-led selloff swept markets around the world.

The remark captured the session. In the US, the Nasdaq Composite sank 694.00 points to 26,008.86, its steepest drop since June 5, and the S&P 500 fell 93.74 points to 7,663.43, its worst day since July. Yet about two of every three S&P 500 stocks rose, according to market reports. The indexes fell because the companies that weigh most heavily on them are tied to AI.

How AI came to dominate the benchmarks

Most major stock indexes weight companies by market value. As AI enthusiasm has sent chipmakers and cloud giants soaring, those companies have grown into the largest components of the indexes. That means a bad day for AI can swamp gains elsewhere.

Thursday proved the point. The Nasdaq-100 lost about $1.32 trillion in market value, according to calculations from a data provider, and the bulk of the damage came from 26 AI and chip names. Nvidia (NASDAQ:NVDA) alone shed about $235 billion as it slid to $212.21, and it was the single biggest drag on the S&P 500.

The trigger: AI's rising bill

The selloff started with Meta Platforms (NASDAQ:META), which reported record revenue but set 2026 capital spending at $135 billion to $145 billion and posted negative free cash flow of $2.12 billion. Lam Research (NASDAQ:LRCX) then warned that supply constraints would persist, and Nvidia CEO Jensen Huang said that "the demand of the capital is much greater than the availability of the capital."

IBM (NYSE:IBM) CEO Arvind Krishna said clients "are also getting worried if some of the AI spending is completely out of control with no real return." "Investors are starting to realize that there are some holes in the AI story," one strategist said.

A worldwide reach

The pain was not confined to Wall Street. In Asia, South Korea's Kospi, Hong Kong's Hang Seng and Japan's Nikkei all fell sharply, markets with heavy weightings in chip and technology stocks. China's CSI 300 closed at 4,036.30 and entered a bear market, measured from its June 22 peak.

European stocks had their biggest drop in three weeks, and France's CAC 40 fell. The iShares AI Innovation ETF also slid.

Some strategists said positioning amplified the moves. "The dominant market dynamic in recent weeks has been the unwinding of AI-related positions by hedge funds," one European bank strategist said.

The other side of concentration

The fund manager's point also explains why the typical stock fared better than the indexes. In the US, consumer staples posted their best day since April 2025 and closed at a record, and health care also hit a record. The equal-weight S&P 500, which gives each company the same weight, rose.

"People are running away from tech," another market commentator said. A third offered a counterpoint: "Buying the dip here has [a] pretty good record of working."

Earnings Week That Could Reset the AI Trade

Next week will test the AI trade directly. Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL) and ServiceNow (NYSE:NOW) report on October 28, the day of the Federal Reserve's decision, and Amazon (NASDAQ:AMZN) and Intel (NASDAQ:INTC) report on October 29. Their spending plans and any evidence of returns on AI investment will shape whether the world's AI-heavy indexes recover or extend their slide.