Business · Markets · 7 hrs ago
October’s AI stock sell-off hit hedge funds and tested wider markets
Hedge funds, including Marshall Wace, were hit by October’s AI stock sell-off.
U.S. technology and AI shares fell sharply after disappointing results from Alphabet, Amazon and Intel.
Investors are questioning whether the huge costs of building AI infrastructure will bring enough returns.
The S&P 500 technology sector fell 6.8 per cent in October, but gains in nine of the index’s 11 sectors kept the overall decline below 1 per cent.
The wider market has so far held up, with more than 70 per cent of S&P 500 companies rising during the month.
AI spending also supports economic growth, so a deeper pullback by major technology companies could hurt businesses beyond the sector.
Investors will watch whether AI companies cut their spending plans and whether the sell-off spreads.
U.S. technology and AI stocks fell sharply in October, while the broader market proved more resilient.
The S&P 500 technology sector dropped 6.8 per cent, its biggest monthly decline since March 2025.
The S&P 500 fell by less than 1 per cent for the month as nine of its 11 sectors gained.
Investors questioned whether returns from AI would justify the heavy spending needed to build infrastructure.
Analysts warned that a deeper decline or reduced spending by major technology companies could affect the wider market and economic growth.
- Who
- Investors and companies exposed to AI and technology stocks. Mark Hackett of Nationwide and Angelo Kourkafas of Edward Jones commented on the market.
- What
- AI and technology shares fell sharply in October, testing whether the broader U.S. stock market could withstand a deeper pullback.
- When
- October; the articles were published on November 2 and 3, 2026.
- Where
- The U.S. stock market.
- Why
- Investors were concerned about heavy AI investment spending and whether it would generate enough returns to justify the cost.
This story does not have two clearly opposing sides.
Technology and AI stocks dominated, in contrast to October’s market trends.
The S&P 500 technology sector fell 6.8 per cent, while nine of the index’s 11 sectors gained.
The technology sector dropped 4.2 per cent, including a nearly 29-per-cent fall for Intel, and the S&P 500 declined 1.8 per cent.
The Globe and Mail published its report on the October decline in AI-related shares.
The Financial Times published a report on hedge fund losses during October’s AI sell-off.
- S&P 500 technology sector
- Down 6.8 per cent in October
- Monthly technology-sector decline
- Biggest since March 2025
- S&P 500 sectors gaining
- Nine of 11
- Technology-sector weight in S&P 500
- 38 per cent
- S&P 500 October decline
- Less than 1 per cent
2 sources
What people are saying
You can have a month of a significant shift in leadership and tech weakness and relative strength in everything else
This year has been unbelievably stable at the index level
In this backdrop, investors want to maintain equity exposure. But now they want to reduce AI concentration risk and are adding to areas that offer differentiated sources of return.