Can the Market Withstand an AI Selloff?

The artificial intelligence trade has been one of the dominant drivers of equity markets over the last several years.

But October may have marked a significant shift in market leadership, raising the question of whether the broader market can continue moving higher without the participation of its largest technology companies.

The S&P 500 technology sector declined 6.8% in October, its worst monthly performance since March 2025. Yet beneath that weakness, the broader market showed surprising resilience. Nine of the S&P 500's 11 sectors finished the month higher, while the S&P 500 itself declined about 1%.

That divergence suggests investors are not necessarily abandoning equities. Instead, they appear to be reallocating capital away from crowded technology positions and into areas of the market that have largely been overlooked during the AI investment boom.

The question heading into November is whether that rotation can continue, or if sustained weakness in technology eventually begins pulling the broader market lower.

Is the AI Trade Losing Momentum? 

Recent earnings have exposed a growing concern among investors: the enormous amount of capital required to build AI infrastructure may be outpacing the financial returns companies can generate from those investments. 

Alphabet (GOOGL), Amazon (AMZN), and Intel (INTC) all faced significant selling pressure following earnings reports that raised questions about capital expenditures, cash flow, and the timing of returns on AI investments. 

Friday's session highlighted how quickly that sentiment can spread. The S&P 500 technology sector decline dragged the broader index down approximately 1.8%. The challenge is that technology still represents roughly a third of the capitalization-weighted S&P 500. Even with improving participation elsewhere, weakness in such a heavily weighted sector creates a considerable headwind for the index. 

There is also a potential economic consequence. AI infrastructure spending has supported demand across semiconductors, utilities, construction, and industrial equipment. If the largest technology companies begin meaningfully reducing those expenditures, some of the very sectors benefiting from market rotation could face their own challenges. 

What Will Determine Whether Rotation Continues? 

The next several trading sessions should provide another important test of investor confidence.

Apple (AAPL) and Palantir Technologies (PLTR) are scheduled to report earnings after Monday's close, followed by Advanced Micro Devices (AMD) on Tuesday, and Arm Holdings (ARM) and Qualcomm (QCOM) on Wednesday.

Palantir's results may offer insight into the commercialization of enterprise AI, while AMD and the semiconductor companies will provide another look at demand across the AI infrastructure market. Investors will likely be paying close attention to forward guidance, capital expenditure expectations, and whether revenue growth continues to justify elevated valuations. 

Beyond earnings, Tuesday's midterm elections could introduce additional uncertainty surrounding government spending, fiscal policy, and potential AI regulation. The outcome could also influence Treasury yields, another important variable for equity valuations. 

Friday's October employment report will provide a final major catalyst for the week. Strong labor-market data could reinforce expectations that the Federal Reserve will maintain a restrictive policy stance, while a weaker report may increase concerns about slowing economic growth. 

For now, the broadening of market participation remains a constructive development, but the technical deterioration in technology deserves attention. If selling pressure begins spreading beyond technology and into previously resilient sectors, October's rotation may ultimately prove to have been an early warning rather than a sign of a healthier market. 

The coming week should help determine which scenario is gaining momentum. 

See: Week Ahead: Apple Earnings and Marquee Jobs Data in Focus and Week in Review: 5 Observations from Leaders at Schwab IMPACT 2026

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