[Concerns about the ROI of AI investments intensify; Nasdaq 100 falls 6.7% in October, worst monthly performance since March 2025] According to a Bloomberg report on October 31, the latest earnings reports from tech giants failed to alleviate investor concerns about the return on investment in AI infrastructure. Despite continued growth in cloud computing, the drain on free cash flow from data center construction triggered a sell-off, with the Nasdaq 100 falling 6.7% in October, its worst monthly performance since March 2025. Among the four hyperscale cloud vendors, Amazon, Meta, and Alphabet all recorded free cash flow deficits this quarter, with Amazon's deficit approaching $35 billion. Microsoft was an exception, with positive free cash flow of $18.6 billion and Azure revenue growth exceeding expectations, but its stock still fell 1.6% on Friday. Alphabet fell 13% on Thursday, its worst single-day performance in history. The company recorded negative free cash flow for the second consecutive quarter, and revenue from its core search business also disappointed. Search accounted for nearly 56% of the company's revenue last year, raising concerns about the risk that AI expansion could erode its core business. Meta's stock has fallen 12% since it released its earnings report on October 21 and increased its annual capital expenditure plan. S&P Global Ratings revised its credit rating outlook from stable to negative on Friday, noting that it is unclear when these expenditures will generate revenue exceeding cost growth. Meanwhile, capital investment continues: Meta's future spending commitments have risen to $825 billion, while Alphabet's future spending obligations exceed $1 trillion. Concerns have also spread to the software industry. ServiceNow's quarterly sales guidance missed expectations, causing its stock to plummet 31% on Thursday; Twilio fell 18% on Friday due to disappointing guidance; and Fortinet lowered its service sales forecast, triggering a sell-off in cybersecurity stocks. Investors are worried that products from companies like Anthropic and OpenAI could erode the pricing power and profit margins of software companies. Chris Osmond, Chief Investment Officer at Fifth Third Wealth Advisors, believes investors are beginning to reward companies that can convert spending into revenue and real returns, and penalize those that haven't yet achieved this conversion or continue to increase spending. Anthony Saglimbene, Chief Market Strategist at Ameriprise, points out that tech giants are transitioning from asset-light, high-cash-flow companies to asset-heavy companies, with changes in cash flow and growth reliability necessitating different valuation methods. He believes AI will now enter a phase of "proving itself," with each quarterly earnings report testing the market's previously high expectations. [Original Link]