US close: Nasdaq drops over 2% as AI sell-off resumes

16th Oct 2026 21:39

(Sharecast News) - US stocks fell sharply on Friday, with the Nasdaq suffering steep losses, as a renewed sell-off in the AI and chip sectors dragged markets lower.

"There's little love for tech stocks right now, investors are dumping them at a rather undignified pace. A recovery last night provided only brief respite, as the selling resumed in the US session. It's clear where the flows are going - to almost everything else," said Chris Beauchamp, chief market analyst at IG.

The S&P 500 dropped 1.1% while the tech-heavy Nasdaq slumped 2.1% to its lowest in a month.

The Dow fell just 0.3%, owing to its lower exposure to the tech sector and its weighting toward consumer-facing names, though it still pulled back after hitting a one-month high on Thursday.

Comments from Kevin Warsh were in focus after the Federal Reserve chairman spoke at an IMF event in Bangkok overnight. While he offered no guidance on whether rates might rise before year‑end, traders interpreted the lack of comment as a sign the central bank will hold policy steady later this month. The CME FedWatch tool now implies an 85% probability the central bank keeps its benchmark rate unchanged at its October meeting.

Nevertheless, concerns about rising borrowing costs and the unsustainability of investment levels in the AI infrastructure space continued to hammer chipmakers and semiconductor equipment stocks on Friday.

Debt-laden neocloud provider CoreWeave was the major casualty of the session, falling 12% as sentiment surrounding the company continues to weaken. The stock has fallen around 30% since the start of October on worries about its huge capex obligations.

Elsewhere, chip stocks remained under pressure, with Micron, AMD and Sandisk all weaker as the sector continues to struggle amid renewed jitters over rising competition from China.

Tesla erased earlier gains after unveiling its next‑generation roadster, though the model was not expected to enter production until 2028.

One high riser was Travelers after posting third‑quarter earnings comfortably ahead of expectations. The insurer delivered adjusted earnings per share of $9.18, well above the $7.25 consensus, while revenues rose to $12.41bn, ahead of forecasts for $11.31bn and broadly flat year‑on‑year.

On the macro front, US import prices rose 1.1% in September, accelerating from a 0.5% gain in August, according to the Bureau of Labor Statistics. The increase was driven by higher fuel and non‑fuel costs, leaving import prices up 8.1% over the year - the strongest 12‑month rise since mid‑2022.

Export prices increased 2.2% in September after a 1.2% rise in August, with both agricultural and non‑agricultural categories strengthening. Export prices were up 11.6% over the year, the largest annual increase since 2022.

Meanwhile, US industrial capacity utilisation rose to 76.9% in September, up from a revised 76.4% in August and ahead of forecasts, according to the Federal Reserve, but still below the long‑run average of 79.4%.