Wall Street Tech Sell-Off Deepens as Fed and ECB Hold Rates

The Nasdaq fell more than 3% as doubts over AI spending hit Alphabet, Intel and Amazon, while the Fed and ECB both held rates and oil climbed to six-month highs.

Maz Vantage ·

Wall Street: AI spending doubts weigh on tech

US equities ended the week under pressure as a tech sell-off deepened. The Guardian reports that the Nasdaq composite fell more than 3% on Friday, the S&P 500 lost more than 1%, and the Dow fell by less; the Nasdaq has shed nearly $1tn in value in a week and about $2tn over the month (The Guardian). The S&P 500 was on track to erase its October gain even though it set an all-time high during the month.

The BBC says the Nasdaq ended October with its worst monthly slide since March 2025, as investors questioned whether heavy AI investment is matched by earnings. Meta, Alphabet, Oracle, Amazon and Microsoft have committed around $800bn of spending between them in 2026 (BBC).

  • Alphabet lost just over $500bn in market value on Thursday after saying its AI search summaries were affecting search advertising revenue, even though quarterly revenue rose 25% to $127.6bn; results fell short of analyst expectations, especially in advertising (BBC).
  • Intel fell 28% on Friday, shedding more than $130bn in value, after a weaker-than-expected fourth-quarter revenue forecast; its finance chief said the PC slowdown should continue at least through the first half of next year (BBC). Nasdaq-published commentary links the drop to surging memory prices denting PC chip sales (Nasdaq).
  • Amazon reported negative cash flow of $42bn as spending rose six-fold over three months, and its shares ended Friday down 1.4% (BBC). Reddit fell 29% and Roblox 18% on weaker user figures.

The Fed holds, with two dissents

The Federal Reserve kept its policy rate unchanged at 3.75%-4%, according to the BBC, a month after raising rates for the first time in three years (BBC; Federal Reserve). Ten of twelve members backed the hold, while Governor Lisa Cook and Cleveland Fed President Beth Hammack voted for a rise. Chair Kevin Warsh said inflation remains too high, declined to signal the next move, and pointed to more data before the 8-9 December meeting. US GDP grew at an annualised 3.4% in the third quarter, stronger than analysts expected, with inflation above the Fed's target.

Europe: ECB on hold, Lagarde to step down

The ECB left its deposit facility rate at 2.50%, the main refinancing rate at 2.65% and the marginal lending rate at 2.90%. It said rising energy prices pose upside risks to inflation and downside risks to growth, that financing conditions have tightened, and that it is not pre-committing to a rate path (ECB). Separately, the ECB announced that President Christine Lagarde will step down on 7 February 2027; the European Council will appoint a successor (ECB).

Oil and China

Investing.com's headline says oil has reached six-month highs as attacks around the Strait of Hormuz threaten Iran peace efforts (Investing.com). Energy costs are the main risk flagged by the ECB above. Another Investing.com headline reports that China's factory activity contracted in October, the third contraction in four months, at the fastest pace in three months, according to a PMI survey (Investing.com).

Crypto: Binance hack

Binance said it is trying to recover $6.3bn stolen in a hack that analytics firms attribute to a North Korean group; the BBC describes it as believed to be the largest of its kind (BBC). The Guardian reports that Binance says it will cover customer losses and has located about $3bn of the affected assets so far (The Guardian).

What to watch

Whether tech earnings can justify AI capital spending, the Fed's December path with inflation above target, and energy prices tied to Middle East tensions.

Sources