A sell-off in artificial intelligence stocks accelerated Friday, as investors fretted about whether the industry’s debt-fueled spending spree still justified such high share prices.

The tech-heavy Nasdaq index dropped 3% on the last trading session of the month. Intel plunged 30% after the chipmaker reported financial results that fell short of Wall Street’s expectations. The shares of Amazon, Nvidia and other tech giants also fell.

The broader S&P 500 index shed 1.8%. Still, in the face of the tech sell-off, the market as a whole has shown resilience this month, bolstered by strength in sectors like energy and utilities, and in companies selling everyday goods. Shares of consumer staples companies rose nearly 2% Friday; the energy sector was not far behind.

For some investors, these pockets of relative strength have helped allay fears that if the AI trade falters, the entire market will fall with it. It points to investor confidence in sectors that for years had languished. And it shows how even as worries about some AI companies have intensified, money has not fled the stock market but is instead being redeployed within it.

Event after Friday’s slide, the S&P 500 is on course to post a loss of only 1% for October, extending a modest 0.5% loss in September. The index is not far below its record high, set earlier this month.

“Money is sloshing around,” said Chris Galipeau, an economist at the Franklin Templeton Institute, the research arm of the asset manager. “We are still close to the all-time high.”

AI and technology stocks more broadly have been the backbone of the market rally for years. But investors are increasingly questioning whether the AI industry’s lofty valuations are realistic, as worries mount about whether profit growth can keep pace with the expectations embedded in high stock prices.

This month, investors dialed down bets on some AI companies, leading to a flurry of sharp, volatile sell-offs. And as companies have reported financial results for the three months through September, investors have looked for more evidence from new, unproven AI businesses that their big bets will pay off.

The communication services sector has fallen almost 14% in October, led by losses for Alphabet and Meta, two of the companies at the forefront of the AI build-out.

Alphabet this week reported earnings that fell short of investors’ expectations, especially in light of the vast sums it is spending. Google’s parent company suffered its worst day in the stock market Thursday, with its share price falling 12.6% and into negative territory for the year. Alphabet has slid roughly 30% since its peak in May, putting the company into a bear market, defined as a loss of 20% or more from a recent high. It shed another 1.5% in value Friday.

Alphabet is one of five “hyperscalers” driving the AI infrastructure build-out. Two of the others — Oracle and Meta — are also in a bear market. Amazon’s earnings report Thursday sent its shares falling, pushing it close to a bear market. Microsoft is the only one of the five with a stock price meaningfully higher than where it started the year.

“A lot of conversations we’re having with clients is, ‘You’ve done well with AI because you were in the market or you were concentrated, but now it’s time to think about rebalancing and putting money elsewhere,’” said Joe Quinlan, head of market strategy for the chief investment office for Merrill and Bank of America Private Bank.

Even AI companies that are seen as more restrained in their spending, and that surpassed earnings expectations, have struggled. Microsoft reported earnings that broadly beat investors’ expectations Wednesday, but the company’s stock price still nudged lower Thursday after it announced that it would raise a further $25 billion from bond investors.

“The earnings bar is very high,” Galipeau said. “We have seen what happens when companies don’t hit that bar.”

As investors have reduced their growth expectations, Treasury yields, which are sensitive to such expectations, have also fallen. The 10-year Treasury yield dipped back below 5% this week, having peaked at 5.3% earlier in October.

And that decline in Treasury yields, which represent the baseline government borrowing costs that underpin interest rates for consumers and companies, has helped lift some of the parts of the market that are more sensitive to interest rates.

Overall, nine of the 11 sectors of the S&P 500 have risen in October, with investors pouring roughly $60 billion into funds that buy U.S. stocks, according to data from EPFR Global, a research company.

Energy stocks have led the index higher, lifted by a renewed rise in oil prices that has bolstered the earnings of Exxon, Chevron and other major players in the industry. Brent crude, the international oil benchmark, rose to $113 per barrel Friday, up from just above $102 at the end of September and around $72 just before the war with Iran started at the end of February. The energy sector of the S&P 500 has risen more than 11% this month.

Stocks in utilities and consumer staples, two sectors that are seen as very sensitive to the path of interest rates, have risen more than 9% in October. The Russell 2000 index of smaller companies, which fell over 11% from mid-August to mid-October, is on course to end the month slightly higher.

Risks remain. The midterm election Tuesday and the continuing war with Iran create uncertainty over the month ahead. Investors are also mindful that inflation could accelerate and Treasury yields rise again, reapplying pressure to the parts of the market that have risen this month while potentially slowing the AI expansion.

“Investors are essentially reallocating some of that AI capital into sectors that are more defensive for now, as they see how the AI trade plays out,” said Malik Ahmed Khan, a technology analyst at Morningstar.

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This article originally appeared in The New York Times.

By Joe Rennison and Aruni Soni
c. 2026 The New York Times Company