Key Highlights

● Technology was the worst-performing S&P 500 sector in the sharpest tech selloff in months.

● The Nasdaq Composite fell 694 points to 26,008.86, wiping out about $1 trillion.

● Nvidia was the single biggest drag on the S&P 500, trading at $212.21.

● Software and cybersecurity stocks rallied as investors sought cheaper, beaten-down names.

Technology was the worst-performing sector in the S&P 500 on Thursday, October 22, as investors dumped chip and artificial-intelligence stocks in the sharpest tech selloff in months.

The sector slid hard, according to market data, as the S&P 500 fell 93.74 points to 7,663.43, its worst day since July. The tech-heavy Nasdaq Composite sank 694 points to 26,008.86, its steepest drop since June 5, wiping out about $1 trillion in market value.

"The only part of the market that is really suffering here is technology," one strategist said. "Investors are starting to realize that there are some holes in the AI story."

Meta and Lam lit the fuse

The selloff traced back to two reports released after Wednesday's close. Meta Platforms (NASDAQ:META) said it expects 2026 capital spending of $135 billion to $145 billion and posted negative free cash flow of $2.12 billion, its first cash outflow in more than a decade. Its revenue was a record, and the quarter included a legal charge of about $10 billion tied to a settlement, per reports.

Lam Research (NASDAQ:LRCX) delivered record revenue of $8.22 billion, but its December-quarter guidance midpoint was slightly below consensus and executives cited supply constraints. "Things are going to continue to be constrained," CFO Doug Bettinger said. Lam plunged to about $230.15.

Nvidia (NASDAQ:NVDA) CEO Jensen Huang added to the unease. "The demand of the capital is much greater than the availability of the capital," he said.

Chips took the heaviest blows

The Philadelphia Semiconductor Index suffered its biggest one-day drop since June 23. Nvidia was trading at $212.21 and was the single biggest drag on the S&P 500, according to market data. Applied Materials (NASDAQ:AMAT) fell to $375.58, KLA (NASDAQ:KLAC) plunged, and Teradyne (NASDAQ:TER) was trading at $308.75.

Intel (NASDAQ:INTC), Advanced Micro Devices (NASDAQ:AMD), Sandisk (NASDAQ:SNDK) and Marvell Technology (NASDAQ:MRVL) all tumbled. Micron Technology (NASDAQ:MU) fell below $900. Arm Holdings and Taiwan Semiconductor's US shares also slid. Hardware names were hit too: Keysight, Corning, Amphenol, Seagate and Dell all dropped sharply.

The iShares AI Innovation ETF (BAI) also sank. According to one set of calculations, 26 AI and chip names accounted for the vast majority of the Nasdaq-100's net loss, with Nvidia alone shedding about $235 billion in value.

Software bucked the trend

Not every tech name fell. Software stocks that have lagged the AI hardware trade rallied as investors sought cheaper, beaten-down names. Adobe (NASDAQ:ADBE) was trading at $270.55 and Intuit (NASDAQ:INTU) at $354.90, both posting solid gains. Salesforce (NYSE:CRM) rose, and HubSpot, Monday.com and Workday gained.

Cybersecurity was another bright spot. CrowdStrike (NASDAQ:CRWD), Okta, Palo Alto Networks, Zscaler, Check Point and Cloudflare all gained.

IBM (NYSE:IBM) staged a big intraday reversal, recovering from steep early losses to finish roughly flat, even after CEO Arvind Krishna warned that customers "are also getting worried if some of the AI spending is completely out of control with no real return."

What it means for the market

The selloff exposed how heavily the major indexes lean on a handful of AI-linked giants. "Every index on the planet is basically an AI index," one strategist said. Under the surface, the market was healthier: about two of every three S&P 500 stocks rose, according to market data.

AI Financing in Focus Next Week

Big tech earnings arrive next week. Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) report on October 28, alongside the Federal Reserve's rate decision. Amazon (NASDAQ:AMZN) and Intel follow on October 29.

Investors will look for clarity on how AI spending is being financed and whether returns are materializing. Teradyne reports on October 27 and Arista Networks on November 3.