Big Tech could calm the AI stock sell-off
Last week was a stress test for the AI trade. The Nasdaq fell roughly 4.5%, its worst week since June, while the S&P 500 lost 1.9%. The Dow Jones, meanwhile, ended the week up 0.7%. So money didn’t leave the market; it simply shifted from AI to cheaper, more stable companies.
Chips took the hardest hit. Semiconductor stocks fell for eight straight days, their longest losing streak since 2008. $NVDA is now more than 10% below its October 6 high, and $MU lost nearly 15% in a single week.
This week, we’ll start getting answers.
$META reports on Wednesday after the market closes, and it will be a clear test of whether AI investments are paying off. Meta plans to spend 130–145 billion USD on capital expenditures (capex) this year. Last quarter, capex reached 31.1 billion USD and free cash flow fell to around 784 million USD. Revenue is expected to come in at around 63.3 billion USD. Over the past eight quarters, Meta’s stock has closed higher after earnings only four times, so simply beating estimates won’t be enough. We need to see genuinely positive data.
Lam Research ($LRCX) also reports on Wednesday, offering the first look at a chip-equipment maker since last week’s sell-off.
Thursday is shaping up to be the busiest day of earnings season so far, with more than two dozen reports, including $WDC. Western Digital could give us more hard data on the memory market.
As for interest rates, the Fed meets on October 27–28, and the market now sees the odds of another increase as roughly 50–50.
Lots of people on X are calling for a Black Monday. Fittingly, tomorrow is the anniversary of the original: on October 19, 1987, the Dow Jones plunged 22.6% in a single day. A repeat is unlikely. When everyone expects a black swan, by definition, it’s no longer a black swan.
Which report are you watching most closely?