Wall Street just punished Big Tech's AI spending spree — and Canadian portfolios felt it

Wall Street's patience with Big Tech's AI spending finally snapped on Thursday. The Nasdaq fell about 2.6% — its worst single-day drop since June — sliding below its 100-day moving average as investors dumped technology shares, while the S&P 500 lost more than 1.2% and only the Dow Jones managed a small gain, according to a market wrap by XTB.

Meta was the epicenter. The company reported third-quarter revenue of $64.6 billion, up 26% year over year and above analyst expectations, but a $9.89-billion legal charge tied to an agreement with 52 U.S. state attorneys general — with payments of up to about $18.59 billion — cut operating income 37% and drove diluted earnings per share down to $3.83, according to analysis of Meta's earnings release. The charge relates to litigation concerning teen mental health and social media. Excluding the charge, Meta said earnings would have been about $7.40 a share. Shares fell 8% on Thursday, XTB reported.

Investors were also rattled by what Meta plans to keep spending: capital expenditure of $130 billion to $145 billion in 2026, mostly for AI data centres and chips, while Reality Labs — the headset and smart-glasses unit — is expected to lose $18 billion to $19 billion this year, analysis of the earnings release showed.

The legal overhang didn't end with the settlement. A New Mexico court ordered Meta to pay a $25-billion penalty in a privacy case on Oct. 21; Reuters reported Meta planned to appeal, according to a markets summary of the week.

Tesla and the rest of the Magnificent 7

Tesla beat third-quarter expectations but fell anyway: declining average selling prices and a battery-supply shortage weighed on revenue, and CEO Elon Musk told analysts the robotaxi business would not "have a game-changing impact this quarter," CNBC reported via DigitalToday. Amazon fell 5.1%, Nvidia 4.4%, and chipmakers AMD and Intel each lost about 8%. Apple rose about 0.9% — the only one of the seven largest U.S. tech companies to gain, XTB reported.

The rout went global. China's CSI300 index fell 20% from its June peak, entering a bear market on its 10th straight week of declines, DigitalToday reported.

What it means for Canadians

Big Tech's weight in global indexes means the sell-off landed directly in Canadian portfolios: anyone holding broad U.S. or global equity funds in an RRSP or TFSA felt Thursday's drop through their fund units. One cushion for the Toronto market has been energy — crude is at its highest since May, as Serious Pick reported on Thursday — but the broader message from the market is that investors now want proof that AI spending pays off, not just bigger capex budgets.

Watch next: the U.S. Federal Reserve meets Oct. 27–28, and the Bank of Canada decides on rates Oct. 28 — Serious Pick's decision-day coverage will be live from the morning of the announcement.