S&P 500 holds up in October even as AI-linked tech stocks fall

In short: The S&P 500 is on track for a small October gain, even though many technology and AI-related stocks fell during the month.

What's going on

The S&P 500, a major U.S. stock index, was set to finish October slightly higher as of Friday, October 30. This is happening even while the tech sector was down about 7% for the month.

Part of the reason is how the S&P 500 is built. It gives more weight to the biggest companies, so a few giants can pull the whole index up, like a heavy anchor affecting a small boat (if the anchor moves, the boat follows). In late October, some large AI-linked chip companies helped keep the index near record levels even as many other stocks lagged.

That unevenness showed up on October 28. The S&P 500 rose about 0.6% even though most stocks inside the index fell, with shares of companies like Broadcom and Nvidia helping lift the overall number.

A day later, the mood shifted again after disappointing results from Alphabet. That renewed concerns about whether big spending on AI will pay off, especially when it is financed with debt (borrowed money that must be paid back with interest). Investors also focused on Meta’s plans for more spending and fundraising, which added pressure to AI-related shares.

What to watch

Investors are likely to keep asking a simple question: will the money companies are pouring into AI lead to profits soon enough to justify the cost. More earnings reports and updates on AI spending plans could keep tech stocks volatile, even if the broader S&P 500 looks calm.

Source: NYTimes