AI and Chip Losses Pull S&P 500 and Nasdaq Lower as Most Stocks Rise

U.S. stock indexes diverged Thursday, Oct. 22, as losses in large technology and chip stocks pulled the S&P 500 and Nasdaq lower while more than 300 S&P 500 constituents advanced.

The S&P 500 fell 1.2% and the Nasdaq dropped 2.6%. The Dow Jones Industrial Average and Russell 2000 edged higher. The 10 largest companies in the S&P 500 represent about 40% of the index’s total value, allowing losses among a few large companies to outweigh gains across a broader group. The concentration echoes concerns around AI-heavy portfolios.

Chip stocks fell sharply. The Philadelphia Semiconductor Index lost more than 6% Thursday and stood more than 26% below its June high, putting it in a technical bear market. Meta shares fell about 7% despite results that topped expectations, amid concerns about its AI spending and future financing needs.

Farzin Azarm, managing director of equity trading at Mizuho Americas, characterized the moves as money shifting among sectors rather than leaving risk assets broadly. He said funds moved toward consumer staples, small-cap stocks and U.S. Treasurys during AI stock sell-offs, then returned to growth stocks when chip and data-center shares rebounded.

The divergence has persisted for weeks. BTIG strategist Jonathan Krinsky counted more than 30% of this year’s trading sessions in which the S&P 500 moved opposite to most of its constituents, a higher share than in any full calendar year since 1996. Krinsky warned that a breakdown in the rotation between AI and non-AI stocks could lead to more synchronized declines.