AI Stocks Slide: Are Tech ETFs Worth Watching? Zacks Equity Research Mon, November 2, 2026 at 10:22 AM EST 5 min read AMZN +4.64% MSFT +0.54% QQQ +0.51% SPY +0.61% GOOGL +1.25% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
The U.S. stock market endured a difficult October as mounting concerns over artificial intelligence (AI) spending, weakening free cash flow and elevated interest rates triggered a sharp selloff in technology and semiconductor stocks. More than $2 trillion in Nasdaq-100 market value evaporated during the month.
The correction has unsettled investors, who had grown accustomed to technology-led market gains. However, the recent weakness does not necessarily signal the end of the bull market or the AI investment cycle. Rather, it highlights a shift in investor priorities where the market is increasingly demanding justification behind massive investments in AI infrastructure that will translate into sustainable revenues, earnings and free cash flow.
For ETF investors, this distinction is crucial. Instead of abandoning equities amid the volatility, investors may find opportunities to reposition portfolios, diversify away from concentrated technology exposure and selectively accumulate fundamentally strong funds.
The latest selloff reflects growing concerns about the financial sustainability of the AI infrastructure boom. Major technology companies are committing substantial capital to data centers, advanced chips and computing infrastructure, but the returns on these investments remain uncertain.
Alphabet's GOOGL shares plunged more than 12% in one session after its quarterly capital expenditure reached approximately $51 billion, contributing to a negative free cash flow of around $9 billion, per Gadget Review, as quoted on Yahoo Finance.
Amazon AMZN also reported negative trailing 12-month free cash flow of $42.4 billion for the period ended Sept. 30 against a positive free cash flow of $14.8 billion a year earlier. Its projected capital expenditure of $220 billion for 2026 has added to investor concerns, per Gadget Review as quoted on Yahoo Finance.
Meta META has also faced pressure from its AI infrastructure commitments, while Microsoft's MSFT ability to remain cash flow positive has highlighted the differences in financial flexibility among the major technology companies.
The market is signaling that AI demand alone is no longer sufficient to justify elevated valuations. Investors want stronger evidence of monetization, better capital discipline and improved cash generation.
The pressure has also extended beyond the largest technology companies. Intel's weak guidance, softer PC demand and manufacturing challenges have weighed on semiconductor sentiment. Meanwhile, concerns that AI-generated search results could weaken referral traffic have added another layer of uncertainty for companies dependent on digital advertising and online engagement.
Higher energy costs and interest-rate concerns have further complicated the outlook. Elevated oil prices can reinforce inflationary pressures, potentially keeping borrowing costs higher for longer. This creates an additional headwind for growth-oriented companies whose valuations depend heavily on future earnings.
Despite the correction, there are reasons to avoid interpreting October's losses as a structural breakdown in the equity market. This is because tech behemoths like Alphabet's latest quarterly results highlighted the contrasting impact of its AI investments.
Google Cloud revenues more than doubled year over year to $30.7 billion, reflecting strong demand for AI and cloud services.
The recent concerns are primarily about the pace, cost and profitability of AI infrastructure expansion rather than the disappearance of demand. Cloud computing, data centers, advanced semiconductors and high-bandwidth memory continue to be important areas of investment.
Strong demand from these segments could support a recovery in selected technology and semiconductor companies, provided revenue growth begins to justify capital expenditure.
November has historically been a relatively strong month for U.S. equities. More importantly, historical analysis shows that the S&P 500 has finished higher 12 months after every U.S. midterm election since 1950, across 19 observations, according to Yahoo Finance. This provides a constructive historical backdrop.
However, the sample is small, and historical patterns are not guarantees of future returns. Current equity valuations are elevated, and the 2026 market's starting position differs from many previous midterm years. Therefore, seasonality should support investor perspective and not serve as a standalone reason to buy.
Invesco QQQ Trust Series I ETF QQQ is designed to track the Nasdaq-100 Index. Its portfolio is heavily tilted toward technology and growth-oriented companies, making it particularly sensitive to trends in AI, semiconductors, cloud computing and digital services.
QQQ warrants close attention, given its significant exposure to key AI-related stocks, including Microsoft (6.17%), Alphabet (2.61%), Amazon (4.12%) and Meta Platforms (2.91%).
QQQ has assets under management worth 487.61 billion and an expense ratio of 0.18%. The fund trades at a three-month average volume of 35.53 million shares. QQQ presently carries a Zacks ETF Rank #2 (Buy).
Invesco Nasdaq 100 ETF QQQM tracks the Nasdaq-100 Index. Hence, the fund is heavily exposed to the same large-cap technology and growth companies.
QQQ warrants close attention, given its significant exposure to key AI-related stocks, including Microsoft (6.17%), Amazon (4.12%), Alphabet (2.61%) and Meta Platforms (2.91%).
QQQM has assets under management worth $111.18 billion and an expense ratio of 0.15%. The fund trades an average three-month volume of 2.93 million shares. QQQM presently sports a Zacks ETF Rank #1 (Strong Buy).
State Street SPDR S&P 500 ETF Trust SPY provides exposure to the same mega-cap companies and tracks the S&P 500 Index.
SPY warrants close attention, given its significant exposure to key AI-related stocks, including Microsoft (5.91%), Amazon (3.74%), Alphabet (5.15%) and Meta Platforms (2.02%).
SPY has assets under management worth $816.07 billion and an expense ratio of 0.09%.
The fund trades an average three-month volume of almost 43 million shares. SPY presently has a Zacks ETF Rank #2 (Buy).
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).
