AI investment return concerns intensify as the Nasdaq 100 index falls 6.7% in October, marking its worst monthly performance since March 2025.

BlockBeats news, October 31 - According to Bloomberg, the latest earnings reports from tech giants have failed to alleviate investor concerns about the return on AI infrastructure investments. Despite continued growth in cloud computing businesses, the consumption of free cash flow by data center construction has still triggered sell-offs, with the Nasdaq 100 Index falling 6.7% in October, marking its worst monthly performance since March 2025. Among the four hyperscale cloud providers, Amazon, Meta, and Alphabet all recorded free cash flow deficits this quarter, with Amazon's deficit approaching $35 billion. Microsoft was the exception, with positive free cash flow of $18.6 billion and Azure revenue growth exceeding expectations, yet its stock still fell 1.6% on Friday.

Alphabet fell 13% on Thursday, marking its worst single-day performance in history. The company reported negative free cash flow for the second consecutive quarter, and revenue from its core search business also disappointed. The search business contributed nearly 56% of the company's revenue last year, drawing attention to the risk that AI expansion could cannibalize its core business. Meta's stock has fallen 12% cumulatively since it released its earnings report on October 21 and raised its annual capital expenditure plan. S&P Global Ratings revised its credit rating outlook to negative from stable on Friday, noting that it remains unclear when these expenditures will generate revenue exceeding cost growth. Meanwhile, capital investments continue to advance: Meta's future spending commitments have risen to $825 billion, while Alphabet's future spending obligations exceed $1 trillion.

Concerns have also spread to the software industry. ServiceNow's quarterly sales guidance fell short of expectations, with its stock plunging a record 31% on Thursday; Twilio fell 18% on Friday due to disappointing guidance; Fortinet lowered its service sales forecast, triggering a sell-off in cybersecurity stocks. Investors are concerned that products from companies like Anthropic and OpenAI could erode software companies' pricing power and profit margins.

Chris Osmond, Chief Investment Officer at Fifth Third Wealth Advisors, believes that investors are beginning to reward companies that can convert spending into revenue and actual returns, while punishing those that have yet to achieve conversion or continue to increase spending. Anthony Saglimbene, Chief Market Strategist at Ameriprise, noted that tech giants are transforming from asset-light, high-cash-flow companies into asset-heavy enterprises, changing the reliability of cash flow and growth, and therefore requiring different valuation methods. He believes that AI will next enter a "prove yourself" phase, with each quarterly earnings report testing the market's previously high expectations.