S&P 500 Falls as Investors Get Spooked by High Costs of AI

Compared to the previous week, the S&P 500 (Index: SPX) didn’t change much in the trading week ending on Friday, 30 October 2026. The index closed out the week at 7,580.07, down a little under 0.6% from where it closed the preceding week.

But that doesn’t quite capture what happened. Stock prices rose the first three days of the week. And then, after the bell on Wednesday, 28 September 2026, tech giant Alphabet (NASDAQ: GOOG and GOOGL) reported not just that they were burning through cash to build up their Artificial Intelligence (AI) infrastructure, their advertising revenue from Internet searches was lower than expected, as their AI-based search feature underperformed expectations.

That was enough to deflate the company’s stock by 12% on Thursday, 29 October 2026, which in turn, contributed to pulling the S&P 500 down by 0.3% for the day. But then after the market closed on Thursday, Amazon (NASDAQ: AMZN) and Intel (NASDAQ: INTC) delivered bad news of higher costs and falling revenues.

Of the two, Intel had the worst of it, with its stock plunging by over 28% by the time markets closed on Friday. More significantly, their combined bad news prompted investors to tank the stock prices of other chipmakers. Including the biggest company in the S&P 500, Nvidia (NASDAQ: NVDA), which lost over 4% of its value and became the second-biggest company in the index as a result by the end of the day.

By the end of the day, the S&P 500 lost over 1.8% of its total value. The latest update of the alternative futures chart shows the index’ trajectory dropped to be near the bottom of the typical range the dividend futures-based model would place it assuming investors are focused on the current quarter of 2026-Q4 in setting stock prices.

With bulls spooked by the sudden rapid deflation of some of the biggest companies in the AI tech sector after their earnings outlook shifted to be worst than expected, we can expect more outsize reactions as other companies report their earnings in the next few weeks. How stock prices will react will depend greatly on what new information investors will need to absorb from the newstreams. Much like they had to do with the market moving headlines from the final trading week of October 2026….

Monday, 26 October 2026

• Signs and portents for the U.S. economy:

• US retailers face record holiday delivery prices from surcharges tied to costlier diesel
• Oil slides over 2% as traders weigh Saudi attack risks, demand destruction
• US airlines favor higher fares over fuller planes as fuel costs squeeze profits
• Microsoft to Trim Workforce with Buyout Offers for 60,000 Staff

• 60,000 Microsoft Workers Offered Buyouts As AI Spending Boom Reshapes Workforce

Fed minions expected to leave interest rates unchanged this week:

• Fed to hit pause on rate hikes, but maybe not for long

Some growth signs developing in China:

• China’s domestic car sales seen rising 2% in 2027 after 2026 slump

Bigger trouble, wage-price inflation spiral developing in Japan:

• Japanese companies compensate users as cyberattacks buffet economy
• Japan auto union group looks beyond inflation-linked pay hikes for 2027 talks

Bigger trouble developing in Eurozone:

• Euro zone firms find it harder to get credit, ECB survey shows
• EU Climbs Escalation Ladder With Beijing, Plans Wider Curbs On Chinese Imports

Wall Street ends higher as AI capex fears pause, Fed decision looms

Tuesday, 27 October 2026

• Signs and portents for the U.S. economy:

• AI investment boom powers US business spending on equipment in September
• Oil rises as hopes for diplomacy offset impact of renewed Houthi attacks

• OPEC+ oil producers set to keep output targets steady at Sunday meeting, sources say
• US energy firms to produce record natgas in 2026 as global demand soars

Hold or sell? High Treasury yields spur US banks to rethink bond portfolios

• CRE debt is due, presenting a ‘massive’ opportunity

US new home sales fall in September; median house price drops from year ago

Fed minions hear speculation in media about their next moves:

• Fed expected to hold rates steady, but Warsh may point way to more hikes
• Fed rate hikes are coming, but not this week: CNBC survey

Bigger trouble, mixed growth signs developing in China:

• In China, the AI bubble has already burst
• China’s industrial profit growth picks up amid deepening economic divergence

Former BOJ chief minion super excited for more interest rate hikes in Japan, JapanGov minion standing by to keep Japan’s currency from collapsing:

• Ex-BOJ chief Kuroda backs more rate hikes, his former deputy urges caution
• Japan stands ready to take decisive action in currency market, finance minister says

Bigger trouble developing in Eurozone:

• Interview. France must ‘cure ourselves’ without more spending, says finance minister
• Euro zone mortgage demand falls as rates rise, ECB survey shows
• Euro zone lending holds up even as banks tighten access

Wall Street ends higher ahead of FOMC rate decision, big tech earnings

• Wall Street ends higher on revived AI momentum
• The S&P 500 minus AI is having its best month in years

Wednesday, 28 October 2026

• Signs and portents for the U.S. economy:

• Mortgage rates fell for the second straight week, but more borrowers still opted for riskier loans
• Oil rises over 1% after Saudi Arabian refinery attack reignites supply risk

• US crude and distillate inventories fall, gasoline stocks rise, EIA says

US goods trade deficit widens as AI-related demand pushes imports to record high

Walmart cuts holiday meal basket price to $3.50 per person

As expected, Fed minions leave U.S. interest rates unchanged, threaten future hikes:

• Fed leaves rates unchanged as it awaits ‘accumulation of more information’

• Warsh to attend Fed jobs and productivity task force hearing to refine views
• Fed officials not aligned on weight of financial conditions
• Fed’s Warsh says US economy not running too hot

Bigger trouble, stimulus developing in China:

• China’s new export curbs draw a line around its AI crown jewels
• Why China is desperate to ship cars outside of the country

Wall Street advances for the third consecutive session after the Fed keeps rates unchanged

• Wall Street ends higher as Fed holds key rate steady, focus turns to earnings

Thursday, 29 October 2026

• Signs and portents for the U.S. economy:

• Q3 GDP Advance Estimate: Real GDP Rises 3.4%

• US Economy Grows 3.4% In Q3, Fastest Pace In A Year, Supercharged By Massive AI Capex Spending

US inflation heats up in September; consumer spending rises

AI-related investment, consumers likely boosted US economic growth in third quarter

• Wall Street’s AI bet: Own the infrastructure, collect the rent

Oil falls as diplomacy hopes outweigh Middle East escalation fears

US weekly jobless claims hover near 57-year lows

Fed minions thinking about their balance sheet:

• Fed highlights economic strength but muddies outlook for Treasuries

• Fed’s policy committee to weigh balance sheet issues early next year, Warsh says

Bigger trouble developing in China:

• Chinese AI model carries out complex cyberattacks in controlled tests, researchers say

• DeepSeek, Moonshot used OpenAI’s GPT-6 Astra to train latest models, The Information reports

Job hunting chief ECB minion to quit ECB early as ECB minions skip rate hike for now with plan to hike Eurozone interest rates later:

• ECB President Lagarde To Step Down In Feb, Months Before Her Term Ends

• ECB President Lagarde resigns at time of mounting challenges for Europe

ECB flags December hike but sees yield rise hitting growth

Nasdaq sheds 1.4% as Alphabet’s historic drop rattles the markets, U.S. stocks suffer

• Wall Street ends lower as Alphabet revenue miss revives AI capex jitters
• Alphabet shares fall after revenue miss, cash burn worsens

• Alphabet earnings miss reflects first real sign that AI is taking a bite out of search

Friday, 30 October 2026

• Signs and portents for the U.S. economy:

• Oil prices increase as attacks on shipping ramp up

Fed minions say inflation bad enough to justify rate hikes, but not until December 2026:

• Fed officials make case for rate hikes amid ongoing inflation concerns

• Fed needs at least two more rate hikes, Logan says

BOJ minions claim success in hitting their inflation target, thinking about more rate hikes later in year to contain it:

• BOJ declares victory in hitting price target, signals near-term hikes

• “Mission Accomplished”: BOJ Declares Victory Over Deflation, Then Speeds Up ETF Dump To A Breakneck 43 Years

BOJ holds rates as underlying inflation aligns with 2% target for first time since 2013

Bigger trouble developing in Eurozone:

• French economy “at a standstill” adds to France’s budget crisis risk

S&P 500 ends week lower as AI concerns fuel rotation into defensive sectors

• Wall Street closes sharply lower as AI cash burn fears spark tech selloff

• Nasdaq faces $2 trillion wipeout in October as AI spending fears deepen

• Nasdaq finishes almost -3% as investors dispose of tech stocks

Amazon burns cash, Intel flags weak PC demand as AI boom’s costs ripple across markets

Intel on course for worst day ever, triggers global chip rout

• Intel Shares Crash Most On Record

The CME Group’s FedWatch Tool projections were unchanged. It still anticipates the Fed will next act to hike the Federal Funds Rate by a quarter point on 9 December (2026-Q4). Looking further forward in time, the FedWatch tool projects the Fed will hike this interest rate by a quarter percent on 17 March (2027-Q1). After that, the FedWatch Tool anticipates one more rate hike in 2027, coming when the Fed meets on 15 September (2027-Q3).

The Bureau of Economic Analysis reported its initial estimate for annualized real GDP growth during 2026-Q3 is +3.4%, just a bit lower than the +3.5% growth projected by the Atlanta Fed’s GDPNow tool a week before.

The GDPNow tool has shifted forward to projecting the current quarter of 2026-Q4′s inflation-adjusted economic growth rate, with its first estimate for the quarter coming in at 3.2%.

Image credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon of a Wall Street bull taking cover under a table as a few balloons labeled ‘AI’ begin to pop while a smiling bear loads a dart labeled ‘COSTS’ into a blowgun”.