US Tech Stocks Rebound as Investors Assess AI Spending Risks

Wall Street's technology sector recovered on Tuesday as investors returned to semiconductor stocks following several sessions of losses driven by concerns about artificial intelligence spending, financing costs and corporate valuations. The Nasdaq Composite advanced 0.83%, while the S&P 500 ended its three-day losing streak, gaining 0.36%, according to CNBC.

The Nasdaq closed at 25,372.01, while the S&P 500 finished at 7,568.92. The Dow Jones Industrial Average moved in the opposite direction, falling 197.26 points, or 0.38%, to 51,786.72. Apple shares weighed on the blue-chip index after disappointing financial guidance.

Apple declined approximately 1.9% after forecasting weaker-than-expected margins, partly because of higher memory chip costs. The company's iPad sales for its fiscal fourth quarter also missed analysts' estimates, according to CNBC and The Guardian.

Semiconductor companies led the recovery. Advanced Micro Devices gained more than 3% ahead of its third-quarter earnings announcement, while Broadcom rose 3%. Micron Technology and Nvidia also advanced more than 2%, with Nvidia recording a 2.3% gain after four consecutive sessions of losses, The Guardian reported.

The rebound followed a broader technology selloff that pushed the Nasdaq into correction territory after it declined approximately 10% from its October 6 record closing level. October also marked the index's largest monthly decline since March 2025, according to The Guardian.

Shawn Snyder, an economic strategist at Potomac Fund Management, cautioned that concerns about financing conditions could continue affecting technology valuations.

"The concerns about the cost of capital and the level of debt financing necessary [are] going to persist for quite some time," Snyder told CNBC.

He also suggested that artificial intelligence-related stocks could be approaching oversold levels, although further declines remained possible.

"maybe there's a little bit more downside, 4% or 5%, but eventually, if there's not a recession associated with these drawdowns, normally that's kind of where it stops."

Investors also monitored the US midterm elections, which could influence congressional oversight and future regulation of artificial intelligence, healthcare and defense industries. Market participants anticipated Democratic gains in the House and potentially the Senate, although election uncertainty did not appear to produce a substantial immediate impact on Tuesday's trading.

CNBC reported that historical market analysis covering post-midterm performance from 1980 through 2024 showed Wall Street generally tended to recover after election uncertainty subsided.

Snyder said the recent decline in artificial intelligence stocks could help support a recovery once political uncertainty diminished.

"You're looking at an AI trade that's already taken a hit," Snyder told CNBC. "That, combined with the idea that the uncertainty from the midterm fades, probably argues for relief rally no matter what."

Barry Sternlicht, chief executive of Starwood Capital Group, separately raised concerns about smaller cloud computing providers specializing in artificial intelligence, commonly known as neoclouds or neoscalers.

"The neo-scalers – maybe some of them will fail," Sternlicht told CNBC.

He identified CoreWeave as a potential acquisition target amid mounting financial pressures affecting the specialized cloud computing sector.

"Perhaps somebody will buy CoreWeave."

The concerns reflect Gartner's October assessment that 80% of neocloud providers could cease independent operations by 2030. The research firm warned that enterprise and consumer AI revenue might not generate sufficient returns to justify all planned infrastructure investments between 2027 and 2030.

Gartner's analysis stated that "enterprise and consumer AI revenue will be insufficient to support profitable returns on all planned AI capital expenditures" between 2027 and 2030.

CoreWeave also faced increasing negative sentiment ahead of its earnings announcement. CNBC reported that short interest exceeded 74 million shares, representing more than 21% of its publicly tradable float, compared with approximately 16% at the beginning of September.

S3 Partners described the increase in short positions during October as "more likely directional." CoreWeave shares had declined approximately 41% over the preceding month, although they recovered more than 5% during Tuesday's session.

Meanwhile, oil prices weakened amid speculation about possible diplomatic progress involving Iran. Brent crude settled at $103.60 per barrel, down 1.12%, while West Texas Intermediate fell 0.38% to $96.09, according to CNBC.

The Guardian also reported that Brent crude had declined from approximately $117 per barrel at the end of October. The easing in energy prices provided additional relief for investors concerned about economic conditions.