By Wael Rashed
Director of Business Development & Corporate Spokesperson, Evest
In Wael Rashed’s assessment, The latest declines in artificial intelligence-related stocks are no longer simply a correction in U.S. technology shares. They are testing Wall Street’s ability to absorb a loss of confidence in the companies that have powered much of the market’s advance in recent years.
The central challenge is not the transformative potential of AI itself. It is the scale of corporate investment and the valuations built on expectations of profits that may take years to materialize. As concerns over capital expenditure intensify, a more consequential question emerges: what happens to the broader U.S. market if investors lose confidence in the returns these companies can deliver?
Market concentration magnifies the risk
As Wael Rashed notes in his analysis of market concentration, The numbers illustrate the extent of the U.S. market’s exposure to major technology companies. According to S&P Dow Jones Indices data at the end of October 2026, information technology accounted for approximately 37.4% of the S&P 500, with communication services representing a further 8.4%. Technology made up around 67% of the Nasdaq-100 in September 2026.
The seven companies commonly known as the Magnificent Seven represented approximately 35% of the S&P 500, although their businesses differ considerably in their exposure to AI. These categories are not interchangeable: neither technology-sector weight nor the Magnificent Seven’s combined share is a direct measure of pure-play AI exposure.
The concentration matters mathematically. If a group representing 35% of an index declined by 10%, it would subtract roughly 3.5 percentage points from that index’s performance, assuming all other constituent prices remained unchanged. This is an illustration of index mechanics, not a market forecast.
Why confidence has weakened
Looking at October’s trading, Wael Rashed observes that October brought renewed selling pressure in U.S. technology shares. The S&P 500 information technology sector declined approximately 6.8% during the month, its sharpest monthly fall since March 2025. Yet nine of the index’s eleven sectors gained, and more than 70% of its constituents advanced, helping limit the benchmark’s overall monthly decline to less than 1%.
That divergence suggests the turbulence was concentrated rather than a uniform collapse in U.S. corporate performance. Concerns focus on rapid spending on data centers, advanced chips, power capacity and digital infrastructure, alongside uncertainty about how quickly those investments can generate durable revenue, earnings and free cash flow. Investors increasingly want evidence of financial returns rather than investment announcements alone.
What if investors lose confidence?
Wael Rashed identifies three potential channels of impact. The repercussions could unfold through three channels. First, lower earnings expectations could trigger further valuation compression among market leaders, directly affecting the S&P 500, Nasdaq indices and investment funds that track them.
Second, if major technology groups scaled back or postponed projects, weakness could spread to semiconductor producers, equipment suppliers, utilities and data-center contractors whose growth plans depend on sustained AI infrastructure spending.
Third, and more seriously, prolonged equity losses could weigh on household wealth and business confidence or coincide with tighter financing conditions, reducing investment and economic growth. These outcomes are not inevitable. A correction could remain concentrated in richly valued stocks, while capital rotates toward other areas of the market.
Does the dot-com comparison hold?
The debate recalls the internet boom and bust at the turn of the millennium, when equity valuations collapsed even as the technology continued to transform the economy. An important difference is that today’s largest technology companies generally have substantial existing businesses, stronger cash generation and deeper financial resources than many speculative internet firms of that era.
The historical comparison is therefore a warning about valuation discipline, not a prediction of a repeat crash. A successful technology does not make every price paid for its shares a sound investment.
Where might capital move?
Persistent pressure on highly valued technology shares could prompt investors to rebalance toward sectors with lower valuations and relatively dependable cash flows, including parts of healthcare, consumer staples and industrials. Gold and government bonds might attract defensive demand if broader economic risks rise, although their performance would also depend on interest rates and the dollar.
Wael Rashed’s analysis ultimately points to this conclusion: Ultimately, the market is not necessarily questioning AI’s future. It is questioning the financial returns embedded in the valuations of its leading beneficiaries. When a small group of companies accounts for such a large share of index performance, the issue extends beyond their individual prospects: it becomes a test of how much repricing the wider U.S. market can absorb.
EDITORIAL REFERENCES
S&P Dow Jones Indices — S&P 500 index information: https://www.spglobal.com/spdji/en/indices/equity/sp-500/
State Street Global Advisors — Nasdaq-100 fund holdings and sector weights: https://www.ssga.com/us/en/intermediary/etfs/state-street-spdr-portfolio-nasdaq-100-etf-qndx
Reuters, 2 November 2026 — AI share declines and U.S. market resilience: https://www.reuters.com/legal/transactional/october-dive-ai-related-shares-tests-broader-us-stock-markets-resilience-2026-11-02/
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