Nasdaq Drops 2.6% as AI Fears Rattle Tech; Yields Tumble
AI spending anxiety hammered chip stocks Thursday while Treasury yields shed up to 19 basis points, sending mixed signals across markets.
U.S. equity markets split sharply on Thursday, with technology stocks bearing the brunt of investor anxiety over artificial intelligence spending and returns. The Nasdaq fell 2.60% and the more concentrated Nasdaq 100 shed 2.90%, as semiconductor and AI-linked names came under sustained pressure. The Dow Jones, by contrast, finished largely flat, and small-cap stocks eked out modest gains — a bifurcation that reveals how much of the recent market rally has rested on a narrow foundation of mega-cap tech.
The other defining move of the session came in the Treasury market, where yields dropped sharply — falling roughly 15 to 19 basis points across maturities. The 10-year yield, which had reached 5.36% just last week, pulled back to 4.96%. Under normal conditions, a decline of that magnitude would provide a meaningful tailwind for growth and technology stocks, since lower borrowing costs make future earnings more valuable in present-dollar terms. That the Nasdaq fell anyway underscores the degree to which sentiment around AI monetization — not the interest-rate environment alone — is now driving valuations in the sector.
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The dollar finished the day in mixed territory, offering its own analytical signal. The Japanese yen led gains against the greenback, with USDJPY falling 0.82% to 156.83, as the Treasury yield decline narrowed the rate differential that had been pressuring the yen for months. The Canadian dollar also firmed, supported by elevated oil prices and a stronger-than-expected September producer price index reading. Notably, the broad-based tech selloff did not trigger a flight into the dollar — a dynamic that suggests the currency's recent strength has been tied more closely to AI-driven capital flows than to traditional safe-haven demand.
Elsewhere, Bitcoin tracked the risk-off mood lower, crude oil buyers retained technical control despite the equity weakness, and gold declined even as yields fell — a reminder that correlations between assets can and do break down during periods of shifting market narrative. The Treasury Department also auctioned $26 billion in five-year TIPS at a high yield of 2.367%, while weekly jobless claims came in at 194,000, beating the 200,000 consensus estimate and confirming continued labor market resilience.
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