Maham Fatima
9 min read
On November 5, the S&P 500 fell 4.36%, its worst day since the April 2025 tariff crash, with roughly $3 trillion in value wiped off S&P 500 companies. The Nasdaq Composite dropped 5.52% to slip into a correction, and chip stocks took the hardest hit, with the Philadelphia Semiconductor Index falling about 12%, its worst day since 2020. The slide followed a rough October, when the technology sector of the S&P 500 lost 6.8%, its biggest monthly drop since March 2025, while defensive groups such as consumer staples had a record month. Growth stocks tend to feel these swings first, because their prices rest on the promise of faster sales and earnings than the rest of the market.
Investors Question the Cost of AI
The worry behind the selling is money. Investors are asking how companies will pay for their enormous artificial intelligence budgets and whether the returns will justify them. The midterm election results added a second concern, as investors began questioning whether the pace of data center construction could slow if new rules follow, which would weigh on AI spending. Our ranking of semiconductor stocks to hold for the next decade covers more of the group that took the sharpest hit.
Why a Ten-Year View Looks Past One Bad Month
A growth stock is a share in a company expected to grow its sales and earnings faster than the market average. These companies usually reinvest profits instead of paying dividends, so shareholders are rewarded through a rising share price, which is why the shares often carry high price-to-earnings ratios. A high multiple is not automatically expensive if the growth keeps coming, but it leaves little room for disappointment, and a stock priced for strong growth can fall sharply when the numbers fall short. Time helps in the other direction, because returns that stay invested earn returns of their own, a snowball effect that builds the longer the money is left alone.
The economy is adding another variable. October’s jobs report showed payrolls up 165,000, far above the 65,000 economists expected, and traders now put the odds of a Federal Reserve rate hike in December above 75%. Edward Jones senior global strategist Angelo Kourkafas called it a “blowout jobs report.” A strong economy is good for business, but higher interest rates make far-off earnings worth less today, which tends to weigh most on growth stocks. For readers hunting for bargains after the pullback, our list of undervalued growth stocks is a place to start. For long-term holders, the more useful question is not what the market does next month but which companies can keep compounding through several more months like this one.
