The Nasdaq Composite experienced a significant downturn in October, falling 5.3% amid growing concerns about the sustainability of the artificial intelligence (AI) boom. This marked the index's worst monthly performance since early 2025, when President Trump's tariffs impacted the market. The decline was driven by investor anxiety over financial results from tech giants like Alphabet and Amazon, as well as the massive capital expenditure (capex) spending on AI infrastructure.
Despite the recent drop, historical data suggests that the Nasdaq tends to recover strongly after such declines. Over the past decade, the index has suffered 15 monthly declines of at least 5%, averaging more than one per year. Following these incidents, the Nasdaq has typically returned an average of 24% over the next 12 months, indicating a potential rebound in the near future.
JPMorgan Chase forecasts that capex spending among the five largest hyperscalers will approach $900 billion in 2026, up from $400 billion in 2025. Globally, AI capex spending is expected to surpass $5.5 trillion by 2030. Dubravko Lakos-Bujas, a market strategist at JPMorgan, believes that Wall Street is overly pessimistic about the situation, arguing that elevated capex today should ultimately lead to higher revenue, stronger margins, and expanding cash flow.
The Invesco QQQ Trust, an index fund that tracks the Nasdaq-100, is highlighted as a compelling investment opportunity. Following the last 14 incidents of a 5% or more monthly decline in the Nasdaq Composite, the Nasdaq-100 returned an average of 26% over the next year, suggesting that patient investors could benefit from the current market conditions.