Last updated: 23 October 2026 · By Analyst, Platizio Global
Whether the AI bubble is bursting is an open question; what has happened is a sharp sell-off concentrated in AI stocks. In the week to 16 October 2026 the Nasdaq Composite fell 4.48%, its worst week since June. At the 22 October close the Nasdaq-100 was 7.26% and the VanEck Semiconductor ETF (SMH), an exchange-traded fund of chip stocks, 21.76% below their record closes, against 1.99% for the S&P 500.
Key takeaways
- Reported triggers: debt-funded data centres, a 10-year US Treasury yield of 5.31% on 5 October (highest since 2002), the Fed’s September rate rise and 3.7% US inflation.
- The evidence cuts both ways: Oracle’s capital spending exceeded its revenue over 12 months, yet the S&P 500’s forward P/E (19.0, FactSet, 16 October) was below its 10-year average.
- The Nasdaq Composite fell 77.93% in 2000–02 and took 15 years to recover; the Nasdaq-100 fell 35.56% in 2021–22 and took about two.
- The rupee rose 1.83% against the dollar from 6 to 22 October, so the fall was deeper in rupees: the Nasdaq-100 fund QQQ lost 7.27% in dollars and 8.93% in rupees.
What fell in October 2026, and by how much?
| Index or stock | Week to 16 Oct | 16 to 22 Oct | Close, 22 Oct | Below record close (date) |
|---|---|---|---|---|
| Nasdaq Composite | −4.48% | −0.50% | 26,008.86 | −5.76% (6 Oct 2026) |
| Nasdaq-100 | −5.49% | −0.78% | 28,958.69 | −7.26% (6 Oct 2026) |
| S&P 500 | −1.95% | +0.05% | 7,663.43 | −1.99% (6 Oct 2026) |
| VanEck Semiconductor ETF (SMH) | −10.53% | −3.05% | US$523.35 | −21.76% (22 Jun 2026) |
| Nvidia (NVDA) | −6.61% | −0.90% | US$212.21 | −11.30% (6 Oct 2026) |
| Oracle (ORCL) | −9.31% | −2.10% | US$125.54 | −61.76% (10 Sep 2025) |
| CoreWeave (CRWV) | −25.21% | −9.43% | US$55.60 | −69.71% (20 Jun 2025) |
Nasdaq closes (S&P 500: Yahoo Finance), before the 23 October session. For illustration only. Record = highest daily close.
On 22 October the Nasdaq fell 2.60% and the PHLX Semiconductor Index 6.72% (Reuters).
Past falls (history, not a forecast; Yahoo Finance daily closes):
- 2000–02: the Nasdaq Composite fell 77.93% and was back above its peak on 23 April 2015, 15.1 years later.
- 2021–22: the Nasdaq-100 fell 35.56% and was back above its peak on 15 December 2023, 2.1 years later.
Why are AI stocks falling? Reported triggers
- Debt-funded data centres. CoreWeave, which rents out AI computing capacity, had US$35.07 billion of debt on 30 June 2026 (10-Q). On 14 October, as yields on its bonds neared 15% (CNBC), CoreWeave fell 15.46% and Oracle, which “has borrowed heavily” for data centres, 8.83% (SiliconANGLE).
- Spending ahead of cash. Meta’s third-quarter capital expenditure (capex), including principal payments on finance leases, was US$34.91 billion, 54.0% of revenue, and its free cash flow −US$2.12 billion (results, 21 October). Its shares fell 6.98% on 22 October as, Reuters reported, earnings reports “ignited fresh fears about the AI spending race”.
- Rates and inflation. The 10-year US Treasury yield hit 5.31% on 5 October, its highest since May 2002 (US Treasury), and was 4.96% on 22 October; higher yields lower the value of future profits. US consumer prices rose 3.7% in the year to September (Bureau of Labor Statistics), and the Fed raised its target range to 3.75%–4.00% on 16 September.
Is it a bubble? The numbers, and who says what
- Spending. Oracle’s capex (purchases of property and equipment, excluding finance leases) was 105.4% of its revenue in the 12 months to 31 August 2026 (SEC filings).
- Valuation. FactSet (16 October) put the S&P 500 at 19.0 times forecast earnings for the next 12 months, below its 10-year average (19.1), but at 26.0 times the past year’s earnings, above it (23.6).
- IMF (Global Financial Stability Report, 13 October): “Weaker or less durable investment and profitability in artificial intelligence could lead to a correction in AI-related asset prices”, amplified, it said, by rising leverage and concentrated exposures. Its briefing added that, unlike in the dot-com era, P/E ratios have fallen as earnings beat forecasts, a cycle that may be hard to sustain.
- Yardeni Research (21 October): “The meter says there’s a bubble, but it’s not about to burst” (Investing.com).
We take no view on whether AI stocks are in a bubble.
What it means for Indian investors in US stocks
- You may already own the AI trade. The Magnificent Seven (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) were 34.54% of the SPY S&P 500 fund on 21 October (State Street). Adding AI stocks or a semiconductor ETF adds to the same bet.
- The rupee can soften or deepen a fall. It strengthened in October, enlarging rupee losses: ₹1,00,000 in QQQ at the 6 October close was worth ₹91,065 at the 22 October close (−8.93%), against −7.27% in dollars (illustrative; RBI reference rates of ₹96.4348 and ₹94.6986 per US$, before costs and taxes; see currency risk).
- Tax on losses. Losses on US shares can be set off only against capital gains, not salary (Income-tax Act, 2025, sections 109 and 111): short-term losses against any capital gain, long-term losses (shares held over 24 months) only against long-term gains, carried forward for eight tax years if you file on time (tax guide). Check with a chartered accountant.
Sources
- Nasdaq: Historical data for the Nasdaq Composite, Nasdaq-100, PHLX Semiconductor Index and the stocks and ETFs quoted (daily closes to 22 October 2026) — https://www.nasdaq.com/market-activity/index/comp/historical
- US Department of the Treasury: Daily Treasury Par Yield Curve Rates (2002–2026) — https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2026
- Federal Reserve: Federal Reserve issues FOMC statement (16 September 2026) — https://www.federalreserve.gov/newsevents/pressreleases/monetary20260916a.htm
- US Bureau of Labor Statistics: Consumer Price Index, September 2026 (CPI-U, all items) — https://www.bls.gov/cpi/
- Meta Platforms: Third quarter 2026 results (Form 8-K exhibit 99.1, 21 October 2026) — https://www.sec.gov/Archives/edgar/data/1326801/000162828026066700/meta-09302026xexhibit991.htm
- CoreWeave: Form 10-Q for the quarter ended 30 June 2026 (filed 12 August 2026) — https://www.sec.gov/Archives/edgar/data/1769628/000176962826000366/crwv-20260630.htm
- International Monetary Fund: Global Financial Stability Report, October 2026, and press briefing transcript (13 October 2026) — https://www.imf.org/en/publications/gfsr/issues/2026/10/13/global-financial-stability-report-october-2026
- Reserve Bank of India: Reference Rate Archive (US dollar, 2025–2026) — https://www.rbi.org.in/Scripts/ReferenceRateArchive.aspx
- State Street Global Advisors: SPY daily holdings (as of 21 October 2026) — https://www.ssga.com/us/en/intermediary/library-content/products/fund-data/etfs/us/holdings-daily-us-en-spy.xlsx
- FactSet: Earnings Insight (John Butters, 16 October 2026) — https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_101626.pdf
- Reuters (via Yahoo Finance): S&P 500, Nasdaq end sharply lower as revived AI doubts ignite tech selloff (22 October 2026) — https://finance.yahoo.com/markets/stocks/articles/nasdaq-futures-drop-over-1-093849296.html
- SiliconANGLE: Shares of Oracle, neoclouds drop on CoreWeave debt concerns (Maria Deutscher, 14 October 2026) — https://siliconangle.com/2026/10/14/shares-of-oracle-neoclouds-drop-on-coreweave-debt-concerns/
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