Wall Street Opens Week Amid $5T AI Wipeout, Apple Earnings, and Midterm Elections

Key points

• S&P 500, Nasdaq 100, and Dow futures opened with gains of 0.2% to 0.4% on Sunday evening.
• AI and chip stocks have lost approximately $5 trillion in market value since October 6, while other large US stocks gained $1.3 trillion.
• Apple is set to report earnings Monday, with focus on iPhone 18 sales; it remains the only 'Magnificent Seven' stock outperforming the S&P 500 this year.
• West Texas Intermediate crude oil settled above $104 per barrel on Friday, its highest close since mid-September, amid ongoing tensions in the Strait of Hormuz.
• US midterm elections occur Tuesday, and the October jobs report is scheduled for Friday, influencing Federal Reserve rate expectations.
• Goldman Sachs forecasts S&P 500 earnings growth will slow from nearly 30% in 2026 to about 18% in 2027 as AI spending matures.

Background

This week follows a severe late-October selloff where AI-related stocks lost $5 trillion in market value, driven by concerns over massive capital expenditures and negative free cash flow from hyperscalers like Alphabet, Amazon, and Meta. The tech sector's decline has been sharp, with Intel and Alphabet recording historic single-day drops, while the broader market rotated into defensive sectors. Earlier warnings from analysts suggested a potential $20 trillion market cap wipeout if the AI trade collapsed, but the recent selloff has been narrow, with most non-tech sectors rising.

How outlets are covering it

Yahoo Finance highlights the resilience of the broader market, noting that 9 of 11 S&P 500 sectors rose last week despite the index's slight decline, and points to historical patterns suggesting a potential rally from midterm October through June. Seeking Alpha, citing Goldman Sachs, emphasizes that slowing AI spending and maturing infrastructure investments will likely reduce earnings growth, potentially undermining stock returns if investors have priced in too much optimism. The Jerusalem Report focuses on the defensive shift, detailing how investors are using put options and credit-default swaps to protect gains, with hedging costs for major tech firms rising to 2021 levels, indicating broad market concern rather than isolated credit events.

Why it matters

The divergence between the AI sector and the broader market signals a potential shift in market leadership and investor sentiment. If Apple's earnings and the midterm election outcomes fail to provide stability, the ongoing AI spending concerns could trigger further volatility. The increased use of hedging instruments suggests that investors are prioritizing capital preservation over growth, which could influence market dynamics and corporate strategies in the coming months.

What to watch

Investors will closely monitor Apple's earnings and iPhone 18 sales on Monday, as well as Palantir's results. The US midterm elections on Tuesday and the October jobs report on Friday will influence Federal Reserve rate expectations. Oil prices may remain elevated due to the Strait of Hormuz tensions and OPEC+ output decisions. Analysts will watch for signs of broadening market leadership beyond tech and AI stocks, as well as continued demand for hedging instruments.