Current setup
The Nasdaq 100 index looks set to open lower after Nasdaq futures fell 0.24% earlier this Friday. The negative sentiment comes as investors reassess the level of returns being reported by AI stocks after the hefty artificial-intelligence investments of 2026. On Thursday 22 October, the Nasdaq Composite declined by 2.4% to 28,855.20 when the AI spending concerns emerged. AI and tech shares felt the pressure as they got sold off, resulting in the Nasdaq’s decline
The sell-off highlights the thematic investor focus towards AI stocks: there must be evidence that AI capital expenditure will lead to sustainable earnings growth and cash flow. Next week’s Federal Reserve meeting is coming amid major technology and AI stock earnings releases. The Fed’s position with regards to interest rates is seen as crucial in determining near-term and medium-term direction of these stocks.
Nasdaq: Key Macro Drivers
1. AI Spending and Tech Earnings
2026 witnessed a heavy ramp-up in AI capex spending. This is now the recurrent theme around quarterly earnings of the Nasdaq-listed tech/AI stocks, as investors want to see the enormous investments in AI infrastructure delivering tangible returns in terms of sustainable earnings growth and cash flow.
Meta’s $825 billion future AI spending commitments are adding to these investor concerns, raising questions as to the sheer magnitude of this cost and how this will be financed. However, earnings showing strong revenue growth, rising cloud demand, and credible AI monetization would be positive for the index. Any signs of a slowdown or rising capex costs without corresponding returns could trigger a deeper correction.
2. Fed Policy and US Treasury yields
The Fed releases its next interest rate decision on 28 October. This meeting will have major implications for US bond yields and tech stock valuations. Higher yields discount the future valuation of technology companies, which is a negative for the Nasdaq. A less hawkish Fed could lower US bond yields, which would be positive for tech stocks and the Nasdaq.
3. Geopolitical Risk and Oil Prices
Brent crude is trading at $116 per barrel as of writing, up significantly over the last ten sessions. Higher energy prices worsen inflationary concerns, which have already seeped into the US producer and consumer chain. Higher inflation forces the Fed to keep interest rates restrictive. Higher credit costs and higher input costs create an uncertain future for tech stocks, especially those that rely on consumer spending to maintain their valuations.
Nasdaq 100: Forecast Scenarios
Bull case: A major catalyst for the bull case scenario is tech earnings showing that earnings growth and cash flow are keeping pace with, or outstripping, AI capex for several companies. Meta’s earnings met these conditions, providing some support to the Nasdaq at the open. Bond yields also fell to 4.99%, the first time they have breached the 5.00% benchmark in a while. A sustained recovery above 29,890 keeps the upside target at 30,758 in view. Above this level, the index will be at new record highs.
Base case: If the market balances the recent drop in bond yields and Meta’s Q3 earnings results (supportive factors) against next week’s expected Fed hawkishness (due to higher energy prices and inflationary caution) and uncertainty about the quality of future earnings calls, the index could consolidate between 28,960 and 29,890.
Bear case: A confirmed breakdown below 28,184 and 27,380 exposes downside targets last seen in April 2026 at 26,046 and 25,140. This will be triggered by disappointing tech earnings, higher oil prices, and defensive positioning in response to Fed hawkishness.
Technical Outlook
Price is testing the 28950 support mark. If the bulls fail to sustain the defence of this support, downside targets at 28,180 and 27,328 come into the picture. If the latter gives way, a deeper correction toward 26,046 cannot be ruled out.
On the flip side, a bounce on 28,950 that uncaps the 29,890 resistance brings in the 30,758 resistance into the picture. Only when this barrier is cleared can we see a revisit of the 6 October all time high at 31,366.