(Oct 22): Stocks fell on Thursday as megacap earnings failed to reassure investors about the rebound in the artificial intelligence (AI) trade, Chinese equities neared a bear market and escalating Middle East tensions drove oil prices higher.

Contracts for the Nasdaq 100 Index slipped 1.3% and those for the S&P 500 dropped 0.7%, as a split set of results from Tesla Inc and Meta Platforms Inc raised doubts about the recent rebound in AI stocks.

In Asia, the Kospi Index — a barometer for the AI trade — declined over 3% as chip heavyweights Samsung Electronics Co and SK Hynix Inc retreated. China’s CSI 300 Index fell 1.3% and was set for a bear market. Alibaba Group Holding Ltd led Chinese e-commerce shares lower after the government called for quality control. The broader MSCI Asia-Pacific Index lost 1.6%, set for its lowest close since end-July.

Tesla shares dropped 3.3% in post-market trading after cutting its capital-spending forecast. Meta Platforms, however, rose 2.2% after hours as the company boosted its bet on AI with spending outlook. Shares of the semiconductor capital equipment company Lam Research Corp fell 7.4% in extended trading after a weaker-than-expected earnings forecast.

“The market is a hard one to please on capital expenditure right now,” said Tim Waterer, the chief market analyst of KCM Trade. “It frets when companies ramp spending, and it frets when they pull it back, as we have just seen with Tesla. In this environment, it’s almost impossible to get the balance right.”

Adding to the pressure, crude oil advanced after deadly attacks in Saudi Arabia heightened concerns that escalating Middle East hostilities could hit supply. Brent climbed 1.7% to trade around US$110.70 a barrel. Treasuries rose on haven demand, while bitcoin and gold declined.

The latest corporate results will test whether earnings can keep the AI trade on track as investors weigh strong growth against the mounting cost of funding the industry’s expansion. Concerns have grown that heavy spending on data centres and computing capacity may take longer to generate returns, while this year’s blistering stock rally has raised questions about stretched valuations and the risk of an AI bubble.

“Markets are basically telling us we are moving on from trading AI vibes and narrative to now requiring a pretty high bar for what an earnings beat looks like,” Kaanhari Singh, the Asia-Pacific head of equity derivatives sales at Barclays plc, said on Bloomberg TV. “That’s both in terms of capex forward guidance, but also for the path of monetisation.”

In other corners of the market, Treasuries climbed across the curve on Thursday, pushing long-end yields to the lowest in a month, as renewed doubts about the durability of the artificial intelligence trade drove investors towards havens.

The 30-year yield dropped three basis points to 5.38%, its lowest since Sept 23.

A Bloomberg gauge of the dollar’s strength slipped 0.1%. Gold declined 1.2% to extend its losses this week and trade around US$4,100 an ounce.

Bitcoin fell over 2% to about US$82,800, leading cryptocurrencies lower.

Doubts over the economics of the AI boom have rattled markets recently, with shareholders demanding clearer evidence that enormous outlays on infrastructure will eventually pay off.

The repricing has been sharp. The Nasdaq 100 lost 5.5% last week, its steepest weekly decline since US President Donald Trump unveiled global tariffs in April 2025. The Philadelphia Semiconductor Index slid for eight consecutive sessions, marking its longest run of losses since October 2008.

Attention is also on the rising tensions in the Middle East and the oil market.

The US State Department issued an ordered departure for non-emergency personnel and their families from Saudi Arabia because of the growing threat from Houthi militants in neighbouring Yemen.

The US and Israeli militaries have developed specific plans for renewed strikes against Iran after the American midterm elections, The New York Times reported, citing US officials and other people briefed on the deliberations.

Investors aren’t “comfortable with oil rising above 110”, said Rajeev De Mello, a global macro portfolio manager at Gama Asset Management. “We are regularly making new highs in oil and energy products, which is stagflationary. Implied volatility on oil options is rising once again reflecting uncertainty about the future path of energy as we approach the Northern Hemisphere winter.”

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