Tech stocks tumble as AI spending concerns wipe nearly $1 trillion off Nasdaq in a week
New York : Technology stocks came under heavy selling pressure on Wall Street on Friday, with nearly $1 trillion in market value wiped off the Nasdaq over the week. Disappointing quarterly results from major companies and growing concerns over the rising cost of artificial intelligence (AI) investments fuelled the sell-off.
The technology-heavy Nasdaq Composite fell 2.9 per cent on Friday, while the S&P 500 declined 1.8 per cent and the Dow Jones Industrial Average lost 1.1 per cent. The Nasdaq has shed more than 5.8 per cent during October, putting it on course for its worst monthly performance since March 2025.
The latest decline followed quarterly results from Intel and Amazon that heightened concerns about the financial burden of the AI race. Technology companies are committing enormous sums to build data centres, acquire advanced chips and expand their AI infrastructure, but investors are increasingly questioning how quickly these investments will translate into profits.
Intel shares plunged nearly 29 per cent on Friday, despite the company reporting a stronger quarterly profit than analysts had expected. Investors were concerned about its outlook for the final three months of the year, which fell short of market expectations. The chipmaker also warned that it did not expect to generate positive cash flow this year, amid heavy investment requirements and weakness in the personal computer market.
Amazon shares also declined after the company reported weaker-than-expected profits for the latest quarter and indicated that its spending would remain high. Its substantial investments in AI infrastructure have raised questions about how quickly these projects can generate additional earnings.
The pressure extended across the technology sector. Nvidia, one of the biggest beneficiaries of the global AI boom, fell 4.2 per cent on Friday, while shares of Advanced Micro Devices also recorded sharp losses. Semiconductor stocks were among the worst performers as investors reassessed the valuations of companies linked to the expansion of AI infrastructure.
The sell-off had intensified a day earlier after Alphabet, Google’s parent company, suffered its steepest one-day decline on record. Its shares fell more than 12 per cent on Thursday, wiping around $500 billion off its market value. Investors reacted to the company’s sharp increase in spending on AI-related projects, alongside concerns about the performance of its core search advertising business.
Investors demand returns from AI investments
The recent decline reflects a broader shift in investor sentiment towards the AI industry. Over the past few years, technology companies have attracted substantial investment on expectations that artificial intelligence would create new revenue streams and transform existing businesses. However, as spending continues to rise, investors are increasingly asking whether the returns will justify the scale of the investment.
Companies such as Meta Platforms, Alphabet and Amazon have raised their spending projections as they compete to expand data centres and acquire the computing capacity required for AI services. The scale of these investments has also raised concerns about cash flow, borrowing requirements and the possibility that high interest rates could make further expansion more expensive.
The latest earnings season has produced mixed signals. Several major companies continue to report strong revenue growth, particularly in cloud computing and AI-related services. However, investors are becoming less willing to reward growth alone when it is accompanied by rising capital expenditure and uncertain profitability.
The market reaction suggests that companies are now being judged not only on how much they are investing in AI, but also on how effectively they can convert that spending into sustainable earnings.
The technology sell-off also overshadowed a mixed performance across the broader US market. While several sectors recorded losses, energy stocks found support from higher oil prices and stronger quarterly results from major oil companies.
The recent decline does not necessarily signal the end of the AI investment boom. But it underlines a growing challenge for the world’s largest technology companies: convincing investors that the enormous sums being spent on artificial intelligence will eventually deliver returns commensurate with their cost.
