US Tech Stocks Slide as AI Costs Mount and Earnings Disappoint
Major tech giants including Intel, Amazon, and Alphabet saw billions wiped off their values as investors fret over massive AI spending and weaker-than-expected earnings.
At a glance
- Intel shares fell up to 30% after forecasting a weaker PC market and no positive cash flow this year.
- Alphabet's stock plunged by over $500 billion as AI summaries disrupted its core search advertising revenue.
- Amazon shares dropped 6% as its quarterly earnings fell short of investor expectations.
US tech stocks experienced significant losses on Friday, driven by mounting concerns over the escalating costs of building artificial intelligence (AI) and a series of underwhelming corporate earnings reports.
The tech-heavy Nasdaq dropped by 2.5% to its lowest level in over two months, with declines spreading across major firms. Chipmaker Intel saw its shares plummet by as much as 30%, on track to lose more than $130 billion in market value. The company warned of a weakening personal computer market, even as it plans to ramp up AI-related spending. Intel's finance chief, David Zinsner, stated the firm does not expect positive cash flow this year and forecast lower-than-expected revenue for the fourth quarter, noting that the PC slowdown is expected to persist through at least the first half of next year.
Meanwhile, Amazon shares fell as much as 6% before recovering slightly after its Thursday evening earnings report failed to meet investor expectations. The sell-off follows a massive $500 billion drop in the value of Alphabet, Google's parent company, on Thursday. Alphabet revealed that its AI-generated summaries were negatively impacting its core search advertising revenue, with shares continuing to slide down 1% in early Friday trading. Other tech companies, including Reddit and Roblox, also continued their downward trend.
The consecutive drops highlight the intense pressure tech companies face as they pour billions into AI infrastructure, raising questions about the immediate financial returns on these massive investments.
Source: BBC Business.
Questions and answers
- Why did Intel's stock fall so sharply?
- Intel shares fell as much as 30% after the company warned of a weakening PC market and stated it does not expect positive cash flow this year, despite planning to increase AI spending.
- How did Amazon's earnings affect its stock price?
- Amazon shares fell as far as 6% before recovering after the company's Thursday evening earnings report failed to meet investor expectations.
- What impact did AI have on Alphabet's search revenue?
- Alphabet revealed that its AI-generated summaries were negatively impacting its core search advertising revenue, leading to a massive drop in its stock value.
