Key takeaways
- Most S&P 500 stocks gained despite index losses
- Equal-weighted stocks outperformed their traditional benchmark
- AI spending concerns triggered a major market rotation
Wall Street ended October with another painful technology-stock selloff, but behind the headlines, something surprising was happening. Most of America's biggest publicly traded companies were actually gaining value.
The S&P 500 fell 0.9% during October even though 72% of its constituent stocks finished the month higher. Meanwhile, the Invesco S&P 500 Equal Weight ETF gained approximately 5%.
AI Stocks Drag Down the S&P 500 While Most Companies Gain
The October selloff was concentrated among companies heavily exposed to artificial intelligence infrastructure and technology spending.
Alphabet fell 18.7% during the month, while Meta declined 15.2%, Micron lost 16.9% and Nvidia dropped 10.4%.
Investors became increasingly concerned about the hundreds of billions of dollars technology companies are committing to AI chips, data centers and cloud infrastructure.
Those fears intensified when Intel suffered a nearly 29% one-day collapse following disappointing guidance. Coinpaper's Intel analysis examined how manufacturing problems and weak demand elsewhere can outweigh strong AI-related growth.
Even Nvidia, whose quarterly revenue more than doubled, struggled as Wall Street questioned the spending capacity of its customers.
As Coinpaper's Nvidia coverage highlighted, strong demand for AI chips does not necessarily protect a stock from falling valuations.
But while technology shares declined, investors were moving toward other parts of the economy.
Consumer staples surged approximately 11% during October, their strongest monthly performance on record according to Nasdaq Dorsey Wright, while utilities and healthcare also attracted demand.
The result was a market with two dramatically different stories unfolding simultaneously.
How Can the S&P 500 Fall When 72% of Its Stocks Rise?
The explanation lies in how the S&P 500 is constructed.
Unlike an index that gives every company equal influence, the standard S&P 500 weights businesses according to their market capitalization.
A company worth $5 trillion therefore has vastly more influence than a company worth $20 billion.
By October, the index's ten largest constituents represented approximately 40% of its total value.
That concentration means sharp declines in a handful of mega-cap technology stocks can outweigh gains across hundreds of smaller companies.
An equal-weighted index works differently, assigning roughly the same portfolio weight to every constituent at scheduled rebalancing dates.
Consequently, gains across a large number of companies have considerably more influence on its performance.
The October comparison makes the effect unusually clear.
The conventional S&P 500 declined 0.9%, while the equal-weighted version gained approximately 5%, even though both tracked essentially the same companies.
What October's Market Rotation Means for Investors
The divergence challenges the assumption that a falling headline index means most stocks are performing poorly.
It also illustrates why owning a broad index fund does not eliminate concentration risk.
Investors holding the S&P 500, Nasdaq-100 and technology-focused ETFs may have significant exposure to the same companies, even though their investments appear diversified.
The recent Nasdaq selloff demonstrated how quickly that concentration can amplify losses when investors turn against AI spending.
Meanwhile, Apple's return as the most valuable company showed that investors were becoming more selective even among technology giants.
