The Nasdaq Could Lose $2 Trillion This Month as AI Payback Doubts Grow

October 31 — According to a Reuters report on 30 October, the Nasdaq 100 may lose more than $2 trillion in market value in October. As tech giants report earnings, investors’ doubts about returns on AI investment are deepening: how long will it take to earn back the huge sums spent building AI infrastructure?

A loss of that size would be slightly more than SpaceX’s entire valuation. As the AI investment boom cools, the Nasdaq 100 has fallen more than 5.8% since the start of October. At the same time Meta, Alphabet and Amazon are racing to expand AI infrastructure and raising their spending forecasts further.

The swelling AI investment makes investors uneasy, especially with borrowing costs rising: companies financing AI with debt pay more and find it harder to justify such enormous outlays.

Apple reports next week, while AI leader Nvidia waits until mid-November. Alphabet’s core search advertising business fell short of expectations and its cash burn accelerated sharply, sending the stock to its largest one-day percentage drop on record on Thursday.

Meta plans to raise funds through a record $97.5 billion financing, raising investor worries about dilution. As AI spending climbs, the market also fears other tech giants will lean more and more on capital markets.

Microsoft and SpaceX look different: their results suggest AI investment is starting to pay off.

“We may have overestimated the potential for growth, but on the whole these companies are not shrinking,” said John Bilton, head of global strategy research for multi-asset solutions at JPMorgan Asset Management. “Our demand for data has no end, and it is still growing.”

Microsoft reportedly plans to issue about $25 billion of US investment-grade bonds, its first such sale in more than nine years. Over the past four years Meta, Amazon and Alphabet have raised hundreds of billions of dollars through bond sales, and investors are starting to worry about over-reliance on debt markets.

Morgan Stanley expects global AI infrastructure capex to top $1 trillion next year.

AI companies’ growing reliance on debt creates new risks for investors. The market had widely assumed that companies at the heart of the AI boom could withstand macroeconomic pressure, but expanding debt financing casts doubt on that view.

The anxiety is spilling from stocks into credit markets. Investors are starting to price in the potential risk: if financing costs keep rising and AI returns disappoint, even companies once seen as resilient could face financial strain.

Since ChatGPT launched in 2022, revenue at the Magnificent Seven has been strong, reflecting robust demand. Even with the timing of AI payback unclear, that revenue growth may be why investors were initially willing to back the spending.

AWS, one of Amazon’s main profit engines, keeps accelerating. Meta’s revenue growth beat expectations and it is optimistic about the outlook. Microsoft also forecast strong cloud growth in its latest results.

Tech giants have poured money into infrastructure before, driving cloud computing, online advertising and e-commerce. The AI boom has pushed capex to startling new levels.

JPMorgan expects global AI capex to reach $5.5 trillion by 2030, with $900 billion spent in 2026 alone.

JPMorgan analysts note that this year’s AI capex at Amazon, Alphabet, Meta, Oracle and Microsoft will likely equal those five companies’ cumulative spending since ChatGPT launched in November 2022.