Three days up, one day down: Wall Street's AI spending week

The Nasdaq Composite spent three sessions of this week clawing back 563 points, then surrendered 694 of them in a single Thursday. It closed that session at 26,008.86 — below where it started the week, after a rally that for three days had looked like a clean recovery from the previous week's rout.

The S&P 500 tells the same story in miniature. It ended Thursday at 7,663.43, a grand total of 3.99 points — five hundredths of one per cent — above the 7,659.44 where it closed on Friday 16 October. Four completed sessions of rally and reversal to arrive almost exactly nowhere. The Dow Jones Industrial Average was the exception, up roughly 1.7% over the same four days on the strength of industrials rather than technology.

On Monday we told readers the week's question was whether the relief in chip stocks would survive the mega-cap earnings still to come. It survived until Wednesday evening. Then Meta Platforms and Tesla reported, and Wall Street concluded it disliked what both had to say about capital spending — in opposite directions.

How the week unfolded

Our sentiment readings moved in one direction all week: Risk-on on Monday, Mixed on Tuesday, Cautious on Wednesday, Risk-off on Thursday and Cautious again this morning. That drift is the week.

Monday's note opened on CoreWeave, whose bonds had spent the previous week trading like distressed debt — its 9.625% notes due 2032 briefly yielding close to 15% as investors asked whether a roughly $50bn debt load was covered by contracted work. They had partly stabilised, the October 2031 issue recovering to 82.8 cents on the dollar, and we flagged that the relief looked set to carry into the wider chip sector. It did: the Nasdaq closed Monday up 1.11% at 26,430.89, with the S&P 500 adding 0.41% to 7,690.73. The Dow slipped 0.07% to 51,966.03.

Tuesday turned on industrials. The Dow jumped 529.85 points, or 1.02%, to 52,495.88, while the Nasdaq went nowhere, easing 0.02% to 26,424.82 and the S&P 500 adding 0.28% to 7,712.57. One feature worth knowing for British readers: unlike the FTSE 100, the Dow is weighted by share price rather than market value, so a big move in a high-priced constituent such as 3M shifts it far more than the company's size suggests. Tuesday also brought the first data miss we flagged: September housing starts at a 1.22 million annual rate, down 5.2% on August against the 1.3 million expected.

Wednesday was the high-water mark. The Dow closed up 0.69% at 52,856.09, the S&P 500 rose 0.58% to 7,757.17 and the Nasdaq gained 1.05% to 26,702.86, helped by the overnight read-through from SpaceX's results. The Philadelphia Semiconductor Index had snapped an eight-day losing streak the day before, its longest since 2008.

Then the catalyst we had circled since Monday landed. Wednesday's note flagged that Tesla and Meta both reported after the closing bell and that options markets were pricing swings of roughly 7% in either direction for each. For Meta that pricing proved almost exactly right, and in the direction holders would not have chosen. Thursday was the S&P 500's worst session since July: the index fell 1.21% to 7,663.43 and the Nasdaq dropped 2.6% to 26,008.86, while the Dow finished essentially unchanged, up 0.02%.

Two other things we flagged resolved against the grain. Thursday's jobless claims, which we said consensus put near 200,000 after the prior week's 199,000, instead came in at 194,000 — a three-month low, and evidence of a labour market that remains tight. It did nothing for equities. And this morning's flash purchasing managers' survey from S&P Global, today's first scheduled catalyst, beat on manufacturing at 56.0 against the 55.5 expected, with services easing to around the 57.9 we had flagged from 58.8. Good news on the economy was not what the market was trading.

Friday's session is still open as this is published. It is just past 1pm in New York and Wall Street does not close until 4pm, so roughly three hours remain and no closing level exists yet. As things stand in early afternoon trading, the S&P 500 is a little below 7,650, down roughly 0.2%; the Nasdaq Composite is close to flat near 26,040; and the Dow is the day's weak spot, down about 1%. On those intraday marks the Nasdaq is heading for a second consecutive losing week while the Dow is on course for a third straight weekly gain. Where any of them finishes will not be known until after this article is out.

Running underneath all five sessions was oil, and it never let up. Brent began the week at $107.88 a barrel, reached $110.13 by Wednesday on attacks on shipping near the Strait of Hormuz, hit a five-month high above $113 on Thursday after reports of tanker damage, and is near $114 this afternoon on reports the United States and Israel may be preparing renewed strikes on Iran. West Texas Intermediate, the US benchmark, is back around $100.90, and the 10-year Treasury yield has sat close to 5.14% all week, elevated since the previous week's hot inflation print.

The names that moved it

One company carried this week, and it is Meta Platforms. Its third-quarter revenue rose 26% year on year to $64.6bn — a beat, in American market language, meaning ahead of the average analyst forecast. The shares still sank roughly 7% on Thursday, because free cash flow turned negative and the company lifted the bottom of its 2026 capital expenditure range to $135bn from $130bn, giving a range of $135bn to $145bn. Quarterly capital spending rose to $34.9bn from $31bn in the second quarter. Investors were not objecting to the trading; they were objecting to the bill.

Tesla was punished for the opposite sin. Adjusted earnings of $0.48 a share beat the roughly $0.43 to $0.44 expected, though revenue of about $28bn fell just short. The shares were indicated around 5% lower before the bell and closed Thursday down 3.1%, after the company cut its 2026 capital expenditure guidance to about $20bn from more than $25bn and pushed back the timeline for scaling its Optimus robot. Quarterly capex fell to $4.7bn from $5.8bn. Spend more and you are burning cash; spend less and you are retreating. That was the week's governing logic.

The damage spread across the AI complex on Thursday: Nvidia fell 4.4%, AMD tumbled 8.1% and Alphabet dropped 3.2%. SpaceX, which we flagged on Tuesday as reporting its first full quarter since listing on Nasdaq in June, had the wildest round trip: its results beat, the shares rose about 8% in extended trading on Tuesday and lifted Asian chipmakers with them — Samsung Electronics jumped 7.1%, SK Hynix 6.2%, the Kospi surged 3.29% — before slumping 9.1% on Thursday. It is indicated up around 1% today.

Netflix was the quiet success. Revenue grew 12% year on year to $12.9bn, in line with its own guidance, an operating margin of 34.6% came in ahead of it, and it lifted its full-year revenue outlook to $51.1bn. Away from technology, industrials kept the Dow afloat: 3M rallied more than 5% on Tuesday after adjusted earnings of $2.50 a share topped the $2.38 consensus and it raised full-year guidance, and RTX beat with adjusted earnings of $2.26 a share on $24.97bn of revenue, lifting its outlook on a record $340bn order backlog. General Motors was the counterexample: it beat estimates and announced a $20bn buyback, yet fell about 5% before Tuesday's bell after flagging roughly $2bn of commodity cost inflation and trimming its full-year profit outlook. You can screen the week's reporters on our US screener.

What to watch next week

The Federal Reserve meets on 27 and 28 October, with the policy decision and press conference on the Wednesday. Officials have been in their pre-meeting blackout — the quiet period in which they do not comment publicly on policy — since before this week began, which is why no Fed speakers featured in any of our notes. The decision arrives with the 10-year Treasury yield near 5.14% and Brent crude around $114, and it is the first scheduled event capable of reframing the AI-spending argument that has run the last two weeks.

Third-quarter earnings season also continues, with a further run of S&P 500 companies reporting through the week. We will flag the dates each morning.