Investors spent Friday reassessing just how much of the stock market's gains this year have been built on artificial intelligence enthusiasm, after a wave of underwhelming earnings from the technology sector sent shares sliding.
The S&P 500 fell 1.8 percent, slipping below its 100 day moving average, a level traders watch closely as a sign of shifting momentum. The Nasdaq 100, which is heavy with technology names, sank 3.5 percent and briefly crossed into correction territory, meaning it had fallen more than 10 percent from a recent high. It was the worst day for stocks since June. Disappointing results and guidance from several large technology companies were the main trigger, raising a question that has been building quietly for months: will the enormous sums companies are spending on artificial intelligence infrastructure actually pay off.
The selloff had been building before the opening bell. Early Friday trading showed a clear flight to safety, with investors buying consumer staples and United States Treasury bonds while selling growth and technology stocks. That pushed the yield on the 10 year Treasury note down toward its lowest level in roughly two months, since bond yields tend to fall when investors are nervous and buying for safety. Gold, often another safe haven, actually fell on the day, while oil prices climbed. The Cboe Volatility Index, a widely watched gauge of expected market turbulence, jumped nearly 9 percent.
Semiconductor and AI infrastructure names were especially hard hit. Chip designer Arm Holdings fell more than 9 percent ahead of its own earnings report next week, and Dutch chip equipment maker ASML dropped around 5 percent. The Philadelphia Semiconductor Index, which tracks major chip companies, entered the day already down close to 9 percent for the month of October. For a market that has leaned heavily on a small group of AI related giants to drive gains through most of 2026, a stumble from even one or two of them has an outsized effect on the broader indexes.
Markets are closed for the weekend, but more big technology earnings are due in the coming week, along with Arm Holdings' report. Traders will be watching whether Friday's drop was a one day scare or the start of a deeper reassessment of AI spending across the industry.
What is a technical correction?
It is a drop of 10 percent or more in a stock index from its most recent high, a common way traders describe a meaningful but not catastrophic pullback.
Why did bond yields fall during a stock selloff?
When investors get nervous about stocks, many shift money into government bonds, and that extra buying pushes bond prices up and yields down.