All three major U.S. stock indexes closed lower: the Nasdaq fell 5.52%, the S&P 500 dropped 4.36%, and the Dow slid 3.44%. Premarket trading had told a different story: Nasdaq futures were up 1.2%, while Dow futures were down 1%. By the close, sentiment had completely reversed.

AI was the target of the selloff. Brian Mulberry of Zacks said the main reason for the market plunge was that hyperscale cloud providers’ free cash flow was declining, while returns on capital spending had yet to materialize. But he added that AI usage had already outstripped available computing capacity, and demand had not weakened.

Put simply: it’s not that nobody is using it—the numbers just don’t add up. No matter how grand the story, the cash-flow figures expose the cracks.

There are two things to watch: first, how capital expenditures and free cash flow look in the cloud providers’ next earnings reports; second, whether the historical pattern of the S&P 500 averaging a 14% gain in the six months after midterm elections holds true this time.

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