October Split the AI Trade, Hardest on Hardware

NEW YORK, Oct. 30 — OctoberOctober split the stock market’s AI trade, and the split was hardest on hardware. The makers of AI hardware and the companies that rent it out fell furthest: Intel lost 45.30 percent over the month, CoreWeave 37.02 percent and Nebius 34.65 percent, and the PHLX Semiconductor index 15.36 percent.

Among the largest technology companies, Alphabet and Meta, whose quarterly free cash flow turned negative this year, fell 18.67 and 15.19 percent, while Microsoft and Apple rose 1.76 and 3.49 percent. Microsoft’s cash from operations exceeded its spending on property and equipment by $18.6 billion last quarter.MSFTNasdaq521.91▼8.23−1.6%Microsoft · Friday’s session Investors and strategists quoted by CNN gave cash as the reason.

Cash flow is an explanation, not a rule: Amazon, whose free cash flow over the 12 months to September was an outflow of $42.4 billion, lost only 3.53 percent in October, while Nvidia, whose free cash flow was a positive $21.3 billion in its quarter to July 26, lost 10.39 percent. On Friday, the day after its report, Amazon’s shares opened at $232.54, touched $229.36 and closed at $240.35, down 1.41 percent.AMZNNasdaq240.35▼3.44−1.4%Amazon · Friday’s session Oracle, whose free cash flow was negative $5.4 billion in its quarter to Aug. 31, lost 4.83 percent in October.

“After cheering on anything AI-related, Wall Street is getting more discerning about which companies are spending rationally and seeing tangible returns on investment,” CNN wrote on Friday. “We’re moving out of the hopes and dreams phase of the AI trade and into the ‘show me’ phase,” Joe Tigay, portfolio manager at Equity Armor Investments, said in a note quoted by CNN. “Full order books are great, but investors want to see who can actually deliver, turn that demand into earnings and generate cash,” he said.

The split showed in the indexes. The Nasdaq Composite fell 5.30 percent in October, its worst monthly decline since March 2025, CNN reported, while the S&P 500 lost 0.93 percent and the Dow Jones industrial average gained 1.70 percent. The Nasdaq-100 lost 6.65 percent. Friday alone took 2.86 percent off the Nasdaq and 1.82 percent off the S&P 500, each index’s worst day since June, CNN reported, and left the Nasdaq 7.8 percent below the record it set earlier in the month.The ScorecardEach change runs from the close on Sept. 30 to the close on Friday, Oct. 30, the last trading day of the month, by this paper’s arithmetic on Nasdaq’s and CNBC’s closing prices.

The Makers

Intel had lost 23.42 percent in October by Thursday’s close, before Friday’s fall of 28.58 percent, its worst day since 1974, CNN reported. Memory and storage stocks fell hard: Sandisk lost 33.85 percent in October, Seagate 30.11 percent, Western Digital 19.44 percent and Micron 16.93 percent. So did the designers and the equipment makers: Arm lost 28.89 percent, Lam Research 27.21 percent, Marvell 25.67 percent and Applied Materials 23.72 percent. Nvidia fell 10.39 percent, TSMC’s American shares 10.97 percent and Broadcom 7.15 percent.NVDANasdaq204.64▼9.02−4.2%Nvidia · Friday’s session

CoreWeave and Nebius, which CNBC calls neoclouds, are AI cloud providers: they rent out computing to others. On Oct. 20 analysts at Truist Securities wrote of “market concerns relating to financing for AI cloud providers,” but said the two were set to benefit as “pricing power will more than offset higher rates,” CNBC reported. From that day’s close to Friday’s, CoreWeave lost 11.69 percent and Nebius 10.10 percent.

The split has a second reading: many of October’s heaviest losers had risen far faster than the chip index this year, and most are still well up. Sandisk is up 384.83 percent since the end of 2025, Micron 209.99 percent, Seagate 134.06 percent, Marvell 131.11 percent, Arm 88.43 percent, Nebius 84.15 percent and Intel 78.21 percent, against 50.91 percent for the chip index. CoreWeave, down 23.38 percent, is the exception. “A lot of these names, Intel is no exception, they just had a phenomenal year already. So, there’s definitely some profit taking as a result,” Mike Dickson, head of research and quantitative strategies at Horizon Investments, said, as quoted by CNN.

We’re moving out of the hopes and dreams phase of the AI trade and into the ‘show me’ phase.

The Spenders

Alphabet’s free cash flow was negative $9.1 billion in the third quarter, after negative $5.9 billion in the second, though over 12 months it was still positive, at $19.7 billion.Free Cash FlowEach company computes it its own way, outside generally accepted accounting principles. Alphabet subtracts capital expenditures from cash from operations; Meta also subtracts principal payments on finance leases; Amazon subtracts purchases of property and equipment net of proceeds from sales and incentives; Nvidia subtracts purchases of property, equipment and intangible assets and principal payments on them. Microsoft’s release gives no such figure. Its Class A shares fell 18.67 percent in October, their worst month on record, CNN reported, and 12.61 percent in the last week alone.GOOGLNasdaq279.84▼3.98−1.4%Alphabet · Friday’s session

Meta’s free cash flow for the third quarter was negative $2.12 billion, against positive $10.63 billion a year earlier; CNN called it Meta’s first negative quarter since 2012. Its shares fell 15.19 percent in October.METANasdaq614.99▼9.53−1.5%Meta Platforms · Friday’s session

Microsoft’s quarter to Sept. 30 brought in $58.0 billion of cash from operations, against $39.4 billion of additions to property and equipment. The difference, $18.6 billion, is the figure CNN cited as Microsoft’s positive free cash flow. Its shares ended October 1.76 percent higher, and just 4 percent below the record they set earlier in the month, by CNN’s count.

Apple, which spends a fraction as much as the others on property and equipment, rose 3.49 percent.Apple’s CashIn the nine months to June 27, Apple’s operations brought in $117.0 billion and it spent $6.8 billion on property, plant and equipment, its quarterly report shows. Amazon spent $77.3 billion on property and equipment in its third quarter alone.

The Tests

Bonds rallied as stocks fell: the 10-year Treasury par yield ended October at 4.94 percent, from 5.29 percent at the end of September. Investors “rotated into defensive parts of the market, like the consumer staples sector and government bonds,” CNN reported.The Bond RallyThe 10-year par yield was highest for the month at 5.31 percent on Oct. 5, by the Treasury’s daily figures. The 2-year yield fell to 4.56 percent, from 4.88.

“Investors don’t just want capex, they want to see the returns already,” Neil Wilson, a strategist at Saxo Markets, said in a note quoted by CNN. Not everyone reads the month as a verdict. “I don’t think this is a moment of reckoning but I think it’s a moment where investors should take a long thought about how positioning across the space still remains crowded even though the fundamentals are strong,” Matt Orton, chief market strategist at Raymond James, told CNBC’s “Squawk Box Europe” on Friday.

The next tests come quickly: Apple reports its fiscal fourth quarter on Monday, Nov. 2, with a call at 5 p.m. Eastern, and Nvidia holds its call on Nov. 17. Nvidia’s quarter ended on Oct. 25. Anthropic, which filed its prospectus publicly on Oct. 26, has yet to set a price range for its shares: by midday Saturday it had filed no amendment on the S.E.C.’s EDGAR system.