The Nasdaq Composite(^IXIC-2.86%) dropped 5.3% in October, recording its worst monthly performance since President Trump’s tariffs rocked the index in early 2025. This time, anxiety surrounding the artificial intelligence boom was the driving force behind the drawdown.
Interestingly, monthly declines of at least 5% are relatively common. In fact, including the latest incident, the Nasdaq has suffered 15 such declines over the last decade, averaging more than once per year.
History says this will happen next.
The Nasdaq Composite plunged in October due to concerns about AI spending
The Nasdaq Composite fell 5.3% in October as investors fretted over the latest financial results from Alphabet and Amazon, while simultaneously trying to wrap their heads around the huge sums of money that technology companies are spending on artificial intelligence infrastructure.
Capital expenditure (capex) spending among the five largest hyperscalers exceeded $400 billion in 2025, and is now forecast to approach $900 billion in 2026, per JPMorgan Chase. That represents an upward revision from $736 billion earlier in the year. Globally, JPMorgan expects AI capex spending to surpass $5.5 trillion by 2030.
Nevertheless, JPMorgan market strategist Dubravko Lakos-Bujas believes Wall Street is too pessimistic about the situation. “The Street appears to be underwriting the AI data center monetization case: Elevated capex today should ultimately translate into higher revenue, stronger margins, and expanding cash flow.”
History says the Nasdaq Composite is headed much higher over the next year
Excluding last month, the Nasdaq Composite has suffered a monthly decline of at least 5% on 14 occasions during the last decade. However, the index has typically recovered quickly. The chart below shows the Nasdaq’s one-year return following those incidents.
| Nasdaq Monthly Loss of 5% or More | Nasdaq 12-Month Return |
|---|---|
| October 2018 | 14% |
| December 2018 | 35% |
| May 2019 | 28% |
| February 2020 | 52% |
| March 2020 | 72% |
| September 2020 | 29% |
| September 2021 | (27%) |
| January 2022 | (19%) |
| April 2022 | (3%) |
| June 2022 | 25% |
| September 2022 | 26% |
| December 2022 | 43% |
| September 2023 | 37% |
| March 2025 | 25% |
| Average | 24% |
As shown above, over the last decade, the Nasdaq Composite has returned an average of 24% during the 12-month period following monthly declines of at least 5%. In other words, history says the Nasdaq Composite will climb 24% over the next year.
Of course, past performance is never a guarantee of future results, but Wall Street has a curious tendency to overreact to headlines. Amazon and Alphabet reported negative free cash flow in the most recent quarter, and investors panicked about return on their invested capital with respect to AI infrastructure.
However, those quarterly reports represent a single data point in what will ultimately be a much bigger picture. Personally, I don’t think the investment thesis for either company has changed. Both are likely to be major winners as the AI boom unfolds, and AI itself is likely to be the most transformative technology in human history.
Short-term volatility notwithstanding, the AI boom is still a great opportunity for patient investors to make money in the stock market. To that end, now is a good time to purchase shares of the Invesco QQQ Trust(QQQ-3.47%).
The Invesco QQQ Trust is an index fund that tracks the Nasdaq-100, a subset of the Nasdaq Composite. Following the last 14 incidents when the Nasdaq Composite dropped at least 5% in a single month, the Nasdaq-100 returned an average of 26% over the next year. That is a compelling reason to buy a few shares today.
