The Nasdaq Composite experienced its steepest drop since June, falling 2.6% to 26,008.86, while the S&P 500 declined 1.21% to close at 7,663.43. This market turmoil was largely driven by growing apprehensions about the sustainability of artificial intelligence (AI) spending, which impacted major tech companies despite some positive earnings. Meta Platforms’ shares dropped around 7%, reflecting concerns about its increased capital expenditures for AI, even though the company beat revenue forecasts. Other tech giants, including Advanced Micro Devices, Micron Technology, and Nvidia, also faced notable losses amid investor unease about the financing of AI infrastructure.

The nervousness extended into the AI-related energy sector, where companies tied to powering data centers saw significant declines. Firms such as GE Vernova and Bloom Energy fell more than 11%, with Vistra, Quanta Services, Talen Energy, and Eaton also posting losses. The sell-off followed Meta’s announcement of heightened AI funding requirements, raising questions about the return on these investments. Adding to market jitters, Nvidia’s CEO Jensen Huang highlighted scarcity of capital in the neocloud sector essential for AI development, signaling that this shortage could hinder growth despite soaring demand.

Geopolitical developments further amplified market volatility as oil prices surged due to reports that the U.S. and Israel plan renewed strikes against Iran after the upcoming midterm elections. Brent crude rose 4% to $113.17 per barrel, its highest since May, and U.S. West Texas Intermediate crude advanced 2.39% to $99.47 per barrel. Heightened concerns about escalating Middle East tensions prompted investors to seek safety in U.S. Treasurys, pushing the 10-year Treasury yield to its lowest in nearly a month at 4.972%, and the 2-year yield fell to 4.659%.

In the broader market, while the Dow Jones Industrial Average inched up 0.02%, investor focus remained on the uneven earnings landscape and sector-specific challenges. Companies such as Lockheed Martin reported better-than-expected results amid strong demand for defense products, while others like Netflix and American Airlines faced downgrades or profit forecast cuts due to competitive and cost pressures. Overall, the combination of AI spending concerns, geopolitical risks, and economic uncertainties contributed to a cautious and volatile trading environment on October 21, 2026.