The Nasdaq Composite slid 5.3% in October, marking its worst monthly performance since tariff policies roiled markets in early 2025. This latest pullback was driven by investor anxiety surrounding the artificial intelligence boom, specifically the massive capital outlays required to build AI infrastructure.
While the decline was sharp, historical context suggests such moves are routine. Including the most recent episode, the index has endured 15 monthly drops of at least 5% over the past decade—an average frequency of more than once per year.
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AI Spending Fears Spark October Selloff
The October decline coincided with quarterly reports from Alphabet and Amazon that highlighted the staggering scale of AI infrastructure investment. Investors grappled with the implications of hyperscaler capital expenditure (capex), which surpassed $400 billion in 2025 among the five largest providers. According to JPMorgan Chase, that figure is forecast to approach $900 billion in 2026, revised upward from an earlier estimate of $736 billion. Globally, the bank projects AI-related capex will exceed $5.5 trillion by 2030.
Despite the market’s apprehension, JPMorgan market strategist Dubravko Lakos-Bujas argues the pessimism is overdone. “The Street appears to be underwriting the AI data center monetization case: Elevated capex today should ultimately translate into higher revenue, stronger margins, and expanding cash flow,” he noted.
Historical Precedent Points to Strong Recovery
Excluding the most recent month, the Nasdaq Composite has recorded 14 monthly declines of 5% or greater over the last ten years. In the aftermath of these events, the index has typically rebounded swiftly. Data from YCharts shows that over the subsequent 12-month periods, the Nasdaq delivered an average return of 24%.
While past performance does not guarantee future results, the pattern suggests a tendency for the market to overreact to near-term headlines. The negative free cash flow reported by Amazon and Alphabet in the latest quarter represents a single data point in a multi-year investment cycle. The fundamental investment thesis for these megacaps remains intact; both are positioned as primary beneficiaries as AI adoption accelerates across the global economy.
For investors with a long-term horizon, the current volatility presents a potential entry point. The Invesco QQQ Trust (NASDAQ: QQQ), which tracks the Nasdaq-100, offers diversified exposure to the index’s largest non-financial companies. Following the 14 prior instances of a 5%-plus monthly drop in the broader Composite, the Nasdaq-100 returned an average of 26% over the following year, reinforcing the historical case for patience.
