October split Wall Street in two: AI stocks sank while oil, drugmakers and utilities soared

October looked very different depending on which part of the stock market you owned. The Nasdaq Composite, heavy in technology, fell 5.3% for the month, its steepest drop since March 2025. The S&P 500 slipped 0.9%. The Dow Jones Industrial Average, which holds fewer of the big AI names, rose 1.7%.

Change over the month

Show the numbers

	October change
Dow Jones	1.7%
S&P 500	−0.9%
Nasdaq	−5.3%

Source: CNBC; Investrade

Only weeks earlier the Nasdaq and the S&P 500 had set record highs. By Friday’s close the Nasdaq was 7.8% below its peak, according to CNN, and the S&P 500 about 3% below its own.

The month the AI bills arrived

The selling centered on the companies spending most heavily on AI data centers and on the chipmakers that supply them. The common thread in their results was cash. For years these companies produced far more cash than they spent. This quarter several of them did not.

• Alphabet reported negative free cash flow of about $9.1 billion for the third quarter, deeper than the $5.9 billion outflow the quarter before. Its shares fell more than 12% on Thursday, their worst day on record, and October was the stock’s worst month on record.
• Amazon spent $77.3 billion on property and equipment in the quarter, and its free cash flow over the past 12 months turned to an outflow of $42.4 billion.
• Meta reported negative free cash flow for the first time since 2012, and S&P Global Ratings changed the outlook on its AA- credit rating to negative over the cost of its AI build-out.
• Intel fell 28.6% on Friday after a weak forecast, and the PHLX Semiconductor Index lost more than 15% over the month.

The Nasdaq 100 was on track to lose about $2 trillion in market value over the month, according to market commentary published by Investrade. Communication services, the sector that includes Alphabet and Meta, fell more than 9%, and technology about 7.5%.

Where the money went

The losses did not spread to the whole market. Nine of the 11 S&P 500 sectors rose in October, and four of them gained more than 10%. Energy led with a rise of about 13%, helped by oil prices above $100 a barrel. Health care, utilities and consumer staples, sectors investors tend to favor when they want steadier earnings, each rose more than 10%.

Company results supported the shift. Eli Lilly jumped 6.6% on Thursday after reporting adjusted earnings of $7.48 a share, far above the $5.38 analysts expected, according to Zacks. Merck and Bristol-Myers Squibb also beat forecasts. On Friday ExxonMobil and Chevron beat profit estimates as refining profits hit records.

Bonds rallied too. The 10-year Treasury yield fell about 0.36 percentage point over the month to around 4.9%, its biggest monthly decline since December 2023, as investors looked for safety. Gold went the other way and ended at a 52-week low near $3,900 an ounce, about 30% below its January record, as markets bet that interest rates will stay high.

What it means

October did not show that demand for AI is fading. Amazon’s cloud sales grew at their fastest pace in nearly five years, and Intel’s data-center revenue rose 78%. What changed is how much investors are willing to pay up front. With the Federal Reserve’s benchmark rate at 3.75% to 4.00% and markets betting on another increase in December, waiting years for data centers to pay off has become more expensive. The market has started to separate companies that can show returns now from those asking for patience.

The next tests come quickly. Apple, AMD and Palantir report next week, Americans vote in the midterm elections on Tuesday, and the October jobs report is due on Friday.