Wall Street Rebounds on Friday but Posts a Fourth Weekly Decline on AI Concerns

Synopsis

The Nasdaq Composite stock index dropped 3.4% for the week on the worst day in over a year for tech shares, though the group rebounded on Friday. The S&P 500 dropped 2.7% and the Dow 0.9%. Concerns over AI valuations drove the selling. Oil prices have fallen and capital inflows have surged as foreign direct investment has remained relatively low in India, and it has limited exposure to capital-intensive AI infrastructure.

The week in numbers

The Nasdaq ended 3.4 percent lower for the week, the S&P 500 was 2.7 percent lower and the Dow was 0.9 percent lower. The S&P 500 ended Friday at 7,376.86, up 2.68% from a week ago when it closed at 7,580.07, marking its biggest weekly decline since the tariff crash in April 2025, according to the 24/7 Wall St. website.

The bulk of the losses were recorded on Thursday, Nov. 5, when the S&P 500 tumbled 4.36%, the biggest drop since April 2025. Technology stocks came back from a “worst drubbing in over a year” Friday, though the Nasdaq's weekly loss was its fourth in a row, Reuters reported.

What triggered it

Heavy selling in stocks that are associated with AI occurred following the release of midterm results. Investors thinking about whether heavy spend on AI infrastructure will be rewarded with the return. The week ending October 16th was actually worse for the Nasdaq Composite (-4.48%), so the decline this week is not the low.

The significant rise in Indian stocks as compared to technology stocks in other parts of the world. Indirect exposure to the most capital-intensive aspects of the global trade in AI infrastructure is comparatively low for India.

Oil prices and foreign inflows and domestic earnings also fed sentiment. India outperformed, partly due to weakness in the global chip trade which redirected trade, says V K Vijayakumar, previously of Geojit. Domestic benchmarks rose more than 8% for the week while the US tech index declined.

Why the split might not be permanent

India is likely to be impacted by a long correction in global technology via its IT service providers, foreign portfolio investment flows, and overall risk appetite. In part, the two markets have been following opposing trends this week due to timing and they've followed each other in many past episodes of stress.

Looking ahead

The next big challenges for the AI trade will come from US consumer price data and Nvidia's earnings. The concentration issue isn't confined to the Nasdaq, as any index fund following the S&P 500 is equally hefty on the same set of large technology firms.