AI spending jitters drag Nasdaq into correction as defensives lead

Last week's trading was dominated by one question: whether the roughly $800 billion of hyperscaler AI spending is paying off, and investors answered skeptically. Alphabet and Microsoft both reported after the close on October 28, with Intel following on October 29 and beating estimates by more than 30%, but the broader unease around capex discipline overwhelmed the good news. Communication Services (XLC) fell 5.32% on the week and Information Technology (XLK) dropped 2.03%, dragging the Nasdaq-100 down 1.97% while the S&P 500 slipped a comparatively modest 0.56%. Capital instead rotated into Health Care, Materials, Utilities, and Consumer Discretionary, each gaining more than 2% on the week.

This week tests whether that rotation holds. The earnings calendar stays dense with the names investors are now scrutinizing for AI spending discipline: Apple and Palantir report Monday, and AMD and Qualcomm follow on Tuesday and Wednesday, both read as proxies for chip and data-center demand. A cluster of utilities, including Entergy, Duke Energy, Southern, and Vistra, report this week just as natural gas prices jumped 13.8%, a direct input to the power costs behind AI data-center buildout. On the macro side, September JOLTS data lands Tuesday alongside the US midterm elections, and the October jobs report arrives Friday, the single most consequential data point of the week since CPI and PPI don't land until the following week.

Big tech's AI spending became the market's central worry last week. Alphabet and Microsoft reported after the close on October 28, and Meta (META) disclosed that its quarterly capital expenditures exceeded operating cash flow, pushing free cash flow negative for the first time in years; the company is now raising up to $95 billion to fund its AI buildout. Intel's October 29 beat, more than 30% above estimates, barely dented the selling in Information Technology (XLK) and Communication Services (XLC). This week extends the scrutiny down the supply chain: Apple (AAPL) and Palantir report Monday, while AMD (AMD) and Qualcomm (QCOM) report Tuesday and Wednesday, both treated as proxies for whether chip and data-center demand justifies the spending. Our catalyst radar has also flagged elevated hyperscaler-linked option and news activity around smaller AI-infrastructure names, a sign the capex-ROI debate that drove last week's rotation out of growth and into defensives is broadening beyond the mega-caps.

Health Care (XLV) led all sectors last week, up 3.12%, as Materials, Utilities, and Consumer Discretionary also outpaced a market weighed down by tech. Biotech strength already showed up in results, with Regeneron beating estimates by 21.2%. This week brings the heaviest healthcare earnings slate of the quarter: Vertex Pharmaceuticals (VRTX) reports Monday, Pfizer (PFE) and Amgen (AMGN) report Tuesday, and Novo Nordisk (NVO) reports Wednesday alongside McDonald's and CVS Health. The results will show whether the rotation into defensives reflects a durable shift in earnings quality or simply a flight from richly valued tech after a rough week for the Nasdaq. A string of beats here would reinforce the sector-rotation trade that's already pulled Health Care, Staples, and Utilities to the top of the weekly leaderboard; a cluster of misses would suggest the money that left tech is simply parked rather than committed.

The energy complex diverged sharply last week: natural gas jumped 13.8% even though it's still down 2.4% over the trailing month, while crude oil (WTI) fell 3.8% on the week despite sitting 7.4% higher over the month. That split matters because power generation, and increasingly AI data-center demand, leans heavily on gas. Utilities (XLU) rose 2.04% last week, and this week's earnings will show whether higher gas costs are showing up in guidance: Entergy (ETR) reports Monday, Duke Energy (DUK) reports Thursday, and Vistra (VST) reports Friday, all with direct exposure to data-center power contracts. On the producer side, ConocoPhillips (COP) reports Thursday into a crude market that's pulling back even as the medium-term trend stays higher. Together these prints offer one of the clearest reads yet on how fast AI-driven electricity demand is showing up in utility and energy-producer numbers.

The macro calendar is lighter than usual: September JOLTS data lands Tuesday alongside the US midterm elections, and the October employment report follows Friday morning, the week's single most consequential data point since CPI and PPI don't arrive until the following week. Chicago Fed President Austan Goolsbee speaks Monday, with other regional Fed presidents scheduled to appear later in the week. Earnings stay heavy throughout: Apple, Palantir, and Vertex Pharmaceuticals report Monday; AMD, Pfizer, Amgen, Shopify, and Booking Holdings report Tuesday; McDonald's, Novo Nordisk, Uber, Qualcomm, and CVS Health report Wednesday; ConocoPhillips, Southern, Duke Energy, and Cummins report Thursday; and Enbridge, Brookfield Asset Management, Vistra, and Charter Communications close out the week Friday.