November 2, 2026

A selloff in AI stocks accelerated on Friday, as investors continued to fret about whether the industry’s debt-fueled spending spree still justified such high stock prices.

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The Nasdaq 100 was the worst performer with a 9 percent decline from its October high and it ended at 28,385. The S&P ended at 7580 for its worst one-day showing since June and it also joined the former for this dubious honor of its worst showing since that time.

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Meanwhile, the Dow ended at 51,770 while the Russell 2000 finished the week higher at 2812, which showed the movement of investors out of the previously tech high fliers into other areas.

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INTC plunged by 29% after the chipmaker reported results that fell short of expectations, while shares of AMZN, NVDA and other tech giants like SNDK also collapsed as well.

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But the overall market has shown resilience, helped by strength in energy, utilities and consumer staples and even after Friday’s slide, the S&P ended October with a 0.9% loss after a modest 0.5% selloff in September.

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But now investors are questioning whether AI industry valuations are realistic as communication services declined by 15% in October with stocks like APP and RDDT getting slammed, and GOOG and META, two of the companies at the forefront of the AI buildout.

On Thursday, GOOG suffered its shares declining by 12.6% and into negative for the year and a decline of 30% since its May peak and ORCL and META also negative in 2026 as well.

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Earnings this week include some major ones with the following: today – AAPL, PLTR, VRTX; Tuesday – AMD, AMGN, BKNG, DD and PFE; Wednesday – CVS, UBER, QCOM and Dow component MCD; Thursday – DUK, COP,

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Economic reports will be most important with: Tuesday – Congressional mid-term elections; JOLTS job openings; Wednesday – September trade balance; Friday – October jobs report with 62,000 projected after 29,000 previously and unemployment rate at 4.2%.

The NYTimes added these observations about the recent Fed decision:

The Federal Reserve made a bet when it decided to hold interest rates steady last Wednesday instead of following September’s increase with another.

The wager centered on a belief that the Fed had the flexibility to gather more information about the state of the economy and the inflation problem it is trying to vanquish before raising rates again, as it is widely expected to do at its final gathering of the year in December.

On Thursday, the Fed got further evidence that its current policy setting, with rates set in a range of 3.75 percent to 4 percent, is not weighing meaningfully on the economy.

The government reported that the economy grew at a rapid clip in the third quarter, with gross domestic product increasing at a 3.4 percent annual rate. That was an acceleration from the 2.2 percent rate in the spring, and was the fastest growth in a year.

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And prices, as measured by the Fed’s preferred gauge, increased 0.5 percent in September from a month earlier and 3.6 percent compared with the same time last year, the report showed. That was well above the Fed’s 2 percent target.

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The stakes for the Fed are high. If price pressures do not moderate as many officials believe in the coming months, or new ones emerge, the central bank could find itself playing catch-up. The more aggressive the Fed has to be later on, the bigger the economic fallout could be.

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“Waiting is not costless,” said Claudia Sahm, a former economist at the Fed “If they wait and find out that those upside risks to inflation they were worried about are not risks but reality, then the Fed will have to do more.”

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Two members of the policy-setting committee on Wednesday signaled they believed the Fed could not afford to wait. Lisa D. Cook, a governor whom the President has sought to fire, and Beth M. Hammack, president of the Federal Bank of Cleveland, voted for a quarter-point increase.

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They were outnumbered by the 10 other officials who voted to hold rates steady. Kevin M. Warsh, the Fed’s chairman, cited a number of reasons not to raise rates despite far-from-reassuring inflation data since the last meeting.

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What did not play a role were the midterm elections, he said. Instead, Mr. Warsh homed in on expectations about future inflation, which still suggest continued confidence that the Fed will eventually make good on its promise to bring inflation back to its 2 percent target after more than six years of overshooting it. Metrics tracking inflation expectations in the year ahead have moved sharply higher, but those are much more volatile and tend to fluctuate with energy prices, which are up significantly because of the war with Iran.

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Mr. Warsh also said the economy, while growing strongly, was not yet overheating and in turn exacerbating the Fed’s inflation problem.

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And Mr. Warsh emphasized that credit conditions for households and businesses had become more onerous in recent weeks. That shift has materialized amid a spurt of volatility across equity markets as well as costlier financing for artificial intelligence companies, whose continued growth is a crucial propellant for the economy.

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“That isn’t something that we’re uncomfortable with. It tells me the policy is working,” Mr. Warsh said.

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In one signal Mr. Warsh sent to convey the Fed was not done raising rates, he said of financial conditions: “I’m unwilling and unable to call them tight.”

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Mr. Warsh gave other hints that further increases are coming. Taming inflation requires “new monetary medicine,” and the Fed is in the process of figuring out the “appropriate protocol,” he said.

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The right dosage will depend on the incoming economic data, said Richard Clarida, a former vice chair at the Fed who is now at PIMCO. One or two more rate increases after a move in December are plausible, he said, but that is contingent on inflation decelerating, as it has yet to do.

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“If we’re sitting here a year from now and core inflation is running at 3 percent, then they’ve got more to do,” Mr. Clarida added.

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A primary driver of inflation has been the war with Iran, which has unleashed an energy shock that has made oil, diesel and other products more expensive. A.I. companies have also played a part, pushing up prices for computer chips and related equipment.
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If inflation does not moderate in the coming months, others said to expect the Fed not to speed up the pace of increases, but instead to tack on more increases as the year progresses. To quicken the pace, the Fed would most likely need to conclude that the “quantum of tightening that is required has increased,” he said.

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At a minimum, he expects the Fed to raise rates in December and March. “If we were to continue to get persistently sticky inflation, it would not at all be surprising to get a rate hike in the second quarter” he again said.

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Ms. Sahm warned that inflation data early next year could be the next major pressure point for the Fed. Price pressures tend to run hot then because companies are more likely to push through price increases in January than any other month, according to research from the Boston Fed.

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Another pressure point could arise if people begin to question the Fed’s commitment to raising rates to quell inflation. There was a whiff of that on Wednesday based on the initial reaction in markets to Mr. Warsh’s comments. Short-dated Treasury yields, which are highly sensitive to expectations about rates, fell while longer-dated yields edged up.

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“If ultimately the Fed does not follow through on the tightening that they’ve signaled, that could lead to a more significant inflation problem,” he said.

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