The US stock market is entering one of the most tense weeks of the year after a sharp sell-off on Friday. The Nasdaq plunged 2.86% — its worst day since early June — while the S&P 500 lost 1.82%.
The US midterm elections, alarming signals around artificial intelligence spending, and a wave of corporate earnings are forming a cocktail capable of triggering even deeper volatility. Friday's session has already been informally dubbed "stock-pocalypse" — a term for a sharp and deep sell-off in equities.
Triggers of the sell-off
The key catalyst was the high rate of capital burn on AI. Intel shares collapsed by nearly 29%, Amazon disappointed investors, and Alphabet had earlier lost about $500 billion in market capitalization. The companies' results reinforced doubts that large-scale investments in artificial intelligence infrastructure will pay off in the foreseeable future.
Additional pressure came from reports about the risk of Anthropic receiving a "junk" rating after its IPO, which heightened anxiety over debt burden in the sector. Negative sentiment was compounded by data on a $6.3 billion hack of Binance. Meanwhile, oil prices remain elevated due to tensions in the Middle East, which continues to weigh on inflation expectations.
Notably, the Nasdaq's decline coincided with rising odds for Democrats in the midterm elections. Analysts agree: the week will be tense, at the very least.
A wide range of forecasts: from correction to crash
Expert assessments diverge dramatically. Mike Wilson of Morgan Stanley expects the S&P 500 to fall roughly 9% from its all-time high — to 7,100 points — viewing such a correction as a buying opportunity with a target of 8,000 by year-end. Michael Hartnett of Bank of America is "tactically cautious" until mid-November, expecting further declines due to political risks and AI-related concerns.
The most dramatic scenario was voiced by Dario Perkins of TS Lombard: a model accounting for AI risks allows for the S&P 500 to fall by at least 30%. Such a correction would wipe out about $20 trillion in market capitalization. At the same time, Perkins does not consider the current instability an unambiguous trigger for such a deep crash.
Earnings reports from Apple, AMD, and Palantir are due this week, with labor market data on Friday. Some investors are hoping for a healthy correction, while others fear that Friday's decline is only the beginning.
Cryptalist analysis: The market has become hostage to two overvalued narratives at once — the boundless monetization of AI and political stability. Friday's sell-off reflects not so much a fundamental breakdown as the fragility of capital concentration in the technology sector. Cryptalist's institutional view: short-term volatility is inevitable, but it is precisely what creates entry points for long-term positions in quality assets.