Nasdaq 100 heads for correction as AI worries rattle investors

The Nasdaq 100 Index is on track to enter a correction as worries about the eventual payoffs from artificial intelligence investments sour sentiment in the technology giants that have powered most of this year’s stock-market advance.

The technology-heavy benchmark slid 1.6% on Tuesday, leaving it on track to close in a correction, which is typically defined as a drawdown of 10% or more from a peak. It only took 38 trading days for the gauge to reach the technical threshold, a stark contrast from its previous correction in March. Back then, the descent from an October 2025 record high took more than 100 sessions.

Tuesday’s drop in the Nasdaq 100 came as losses in semiconductor stocks deepened as signs of progress in China’s advanced chipmaking industry compounded worries about the sustainability of the artificial intelligence spending boom.


Last week saw Alphabet Inc. suffer its biggest one-day drop in more than a year as its results showed that the Google parent is spending so much that free cash flow turned negative for the first time in its history as a public company. It also signaled a lot more spending going forward, which overshadowed a number of positives, including robust growth in its cloud-computing business.

Three other major spenders on AI are due to report this week, with Microsoft Corp. and Meta Platforms Inc. due on Wednesday, and Amazon.com Inc. reporting Thursday afternoon.

“People are worried about capital spending, the return on that spend, the level of free cash flow, and there’s some dis-investment going on ahead of the Big Tech reports we’re seeing this week,” said Jim Awad, senior managing director at Clearstead Advisors. “If they’re able to prevail and reassure people this week, that will add a lot of support to the market. On the other hand, if we see more negative cash flow and a lot more spending, I think we can expect to see the group remain under pressure.”

Investor enthusiasm for shares of companies set to benefit from the hundreds of billions of dollars being spent on AI infrastructure has also taken a hit in recent weeks amid worries that this year’s rally had gone too far, too fast. The Nasdaq 100 had jumped nearly 34% in a span of roughly two months, propelled higher by memory chipmakers including Micron Technology Inc. and Sandisk Corp., which tripled in value over that stretch.

The unwind has, likewise, been driven by chipmakers, led by declines of more than 30% in the likes of Qualcomm Inc., Sandisk and Marvell Technology Inc. since the Nasdaq 100’s June 2 high. The Philadelphia Semiconductor Index, which tracks 30 US-listed chip stocks, has plunged more than 25% from its June peak.