Key Highlights

● Fastly slumped Friday in a broad tech retreat that gathered pace through the afternoon.

● The move came without any new guidance or announcement from the company.

● In a 45-stock software basket, 41 names fell, erasing roughly $130 billion in value.

● Netflix reports Oct 20, several tech giants Oct 21, and Twilio Oct 29.

A steep midday drop

Fastly (NYSE:FSLY), which runs an edge-cloud platform that helps websites and applications deliver content and run code close to their users, slumped on Friday. A 2:01 p.m. market update listed the stock among the session's biggest losers and gave no company-specific catalyst. The Russell 2000 member moved with a broad tech retreat that gathered pace through the afternoon. Fastly competes with larger content-delivery and edge-computing providers, and its shares often track sentiment toward cloud and internet-infrastructure spending. The move came without any new guidance or announcement from the company.

Fastly was among the hardest-hit names in a selloff in small and mid-cap software, cloud and AI-infrastructure stocks, alongside DigitalOcean (NYSE:DOCN), Bandwidth (NASDAQ:BAND), Twilio (NYSE:TWLO), Nebius Group (NASDAQ:NBIS), CoreWeave (NASDAQ:CRWV), Okta (NASDAQ:OKTA) and SentinelOne (NYSE:S).

DigitalOcean, a cloud-hosting provider that is a close comparison for Fastly, also slumped, with market commentary citing worries about AI financing and elevated rates. Twilio reversed early gains and tumbled, which one report attributed to profit-taking after its addition to the S&P 500 and valuation concerns.

The AI-financing scare

The backdrop was a shift in how investors view the artificial-intelligence trade. According to market commentary, the question moved from what AI can do to how it will be financed, and debt-funded infrastructure names took the heaviest losses. CoreWeave, whose debt tops $50 billion, plunged as reports indicated that the cost to insure its debt hit a record.

Software was swept up in the selling late in the day. In a 45-stock software basket, 41 fell, erasing roughly $130 billion in market value. Snowflake (NYSE:SNOW) tumbled and ServiceNow (NYSE:NOW) slid, while cybersecurity names including Fortinet (NASDAQ:FTNT) and CrowdStrike (NASDAQ:CRWD) fell sharply late in the session, per market reports.

One market commentator said, "The AI group is now splitting between companies that can fund the buildout themselves and those that have to borrow."

Indexes turn lower

Stocks opened higher before reversing. The Russell 2000 fell 45.90 points to about 2,721, according to market data, with another report putting the close at 2,719.57. The S&P 500 lost 84.62 points to 7,659.44, ending a 55-session run without a large daily drop, its longest such streak in more than six years. The Nasdaq Composite fell 572.99 points to 26,140.03, and the Dow Jones Industrial Average slipped 175.28 points to 52,002.41.

All but seven of the 75 technology stocks in the S&P 500 closed lower, market reports showed. Energy, utilities and consumer staples gained as investors sought shelter, and the Cboe Volatility Index rose 3.53 points to 19.99.

Fastly Awaits Cloud Sentiment Signals

On rates, the Federal Reserve's next decision is on Oct 28. Chair Kevin Warsh said at an IMF gathering in Bangkok, "I don't prejudge meetings." The personal consumption expenditures price index and the first estimate of third-quarter GDP arrive on Oct 29. The 10-year Treasury yield finished around 5.1 on Friday, per market data. Long-term yields remain a key influence on the valuations of growth stocks such as Fastly.

Tech earnings season ramps up next week, and results could shape sentiment toward cloud and infrastructure stocks. Twilio reports on Oct 29. Netflix (NASDAQ:NFLX) reports on Tuesday, Oct 20, and Meta Platforms (NASDAQ:META), Tesla (NASDAQ:TSLA), IBM (NYSE:IBM) and SAP (NYSE:SAP) report after the close on Wednesday, Oct 21.