Chips crack on AI spending worries while the Dow holds flat

Thursday, October 22 split the market in two. Chip and big tech stocks had one of their worst days in months, while the average stock rose and the Dow proxy finished flat. Because the S&P 500 is weighted toward the biggest companies, the S&P proxy still closed −1.18% with the vol proxy up 6.1%, past the −1% line that scores Rattled. That ends a three-day winning streak and is a sharp turn from Wednesday's Grinding close, when the same chip stocks led the market higher.

Research

What the tape confirms: the Nasdaq proxy fell 2.84%, while the Dow proxy (+0.03%) and small caps (+0.08%) were flat and the equal-weight S&P ETF rose 0.72%. Money moved into safer assets. Long Treasuries gained 1.86%, utilities 2.05%, health care 1.33%, real estate 1.12%, financials 1.11% and regional banks 2.49%. The crude proxy rose 1.68%, the dollar proxy slipped 0.10%, gold fell 2.62% and Bitcoin finished about 2% lower near $81,200.

The damage was concentrated in chips and AI. The chip ETF fell 6.02% and the tech sector 3.29%. Lam Research dropped 11.75% after its report, Intel 8.03%, AMD 8.13%, Seagate 7.87%, ASML 6.93%, Western Digital 6.42%, Micron 6.20%, TSMC 4.52%, Nvidia 4.36% and Broadcom 4.28%. Meta fell 6.97% after its report, Amazon 4.53%, Alphabet 3.15%, Tesla 3.08% and Microsoft 2.12%. SpaceX gave back 9.14% after Wednesday's jump, and the AI cloud provider CoreWeave fell 10.08%. Apple was the exception among the giants, up 1.26%.

Outside tech, this morning's reporters mostly rallied. Spotify rose 11.06%, Blackstone 8.37%, Lockheed Martin 7.02%, Procter & Gamble 5.59%, Union Pacific 3.55%, Comcast 3.49%, Norfolk Southern 2.98% and Honeywell 1.70%. Valero fell 2.43% and Newmont 2.75%. Netflix bounced 3.14% after Wednesday's drop.

After the bell, Western Digital traded near $330, about 6.8% below its $354.22 close. Deckers traded about 7.9% lower, Comfort Systems about 6.5%, Bloom Energy about 4.8% and Seagate about 4.1%, while Newmont was about 0.8% higher. On the economic calendar, weekly jobless claims, leading indicators and the Kansas City Fed survey came out today, but no actual figures are posted for any of them; claims show only the prior of 199K. Company actuals aren't on the calendar either: P&G (estimate $1.89), Lockheed ($7.49), Spotify ($3.10), Blackstone ($1.26), Western Digital ($4.09) and Newmont ($1.94) all show estimates only.

What X is saying

The main story on X was the cost of AI. Posts said Meta's revenue was strong but its higher floor for spending on data centers, along with a large legal charge, worried investors about how the AI build-out gets paid for, and that worry spread to chipmakers and cloud providers. Several accounts called it a day where good results did not protect anything priced for perfection. Some posts said the head of Nvidia had warned that AI funding is getting tighter; we could not confirm that. Others pointed to Brent crude above $113 on Middle East tensions and the 10-year Treasury yield slipping below 5%.

On the numbers, posts describe jobless claims at 194K, below the prior 199K. P&G is reported at $2.00 EPS against $1.89 expected, on revenue of $23.3B, with its full-year outlook kept. Western Digital is reported at $4.64 adjusted EPS against about $4.09 expected, on revenue of $4.38B, up 55%, with next-quarter guidance of $5.0B to $5.2B in revenue, well above estimates. The stock fell after hours anyway. Bloom Energy is described as beating on sales and earnings. All of these figures are street-reported and unconfirmed.

Insight

What is locked for the close: Rattled mood, S&P proxy −1.18%, vol up 6%, the Nasdaq proxy down nearly 3% and the average stock up. This was not a broad panic. Investors sold the AI winners and bought bonds, utilities, staples and companies with solid reports. All week money has swung between big tech and everything else, but today the swing was big enough to pull the index down hard. Western Digital falling after what posts describe as a strong beat suggests the selling in AI hardware isn't finished, so Friday's open will show whether chip buyers come back or keep stepping aside.

Friday's lookahead: the flash manufacturing and services PMIs land at 9:45 AM ET (priors 57 and 58.7), and the final University of Michigan consumer survey at 10:00 AM ET (prior 48.1); no forecasts are posted. Before the open, American Express (EPS est $4.48, expected move about 3.2%), Schlumberger ($0.62), Infosys ($0.21) and Booz Allen ($1.44) report. Monday brings Verizon before the open and Cadence, Nucor and Celestica after the close.