US tech stocks drop nearly $1 trillion as AI spending concerns mount

Major US indices fell sharply as disappointing earnings from Alphabet, Amazon, and Intel fueled investor doubts about the high costs and slow returns of artificial intelligence.

Wall Street experienced a significant downturn as large-scale technology firms reported earnings that failed to satisfy investor expectations. According to The Guardian, the Nasdaq composite fell more than 3% on Friday, though Euronews reported the index finished down by more than 1%. This volatility has contributed to a week-long slide that knocked nearly $1 trillion in value off the tech-heavy exchange and erased approximately $2 trillion over the course of the month.

Individual stock performances were marked by record-breaking declines. Alphabet saw its worst day ever, plunging more than 12% after disclosing that mammoth investments in AI caused it to burn through more cash this summer than in the previous quarter. Intel also suffered heavy losses; while Euronews reported a 23% drop, The Guardian stated the stock tumbled nearly 30%, flirting with its worst single-day performance since 1974 due to a weak profit forecast.

Amazon’s shares fell after it reported summer profits that missed analyst estimates and revealed higher-than-expected spending for the year. Euronews noted that the company tanked more than 7% in after-hours trading, while The Guardian cited a 1.8% decline during regular hours. These reports have intensified scrutiny of "hyperscalers" like Meta and Alphabet, which continue to raise spending forecasts to expand the infrastructure required for AI.

The sell-off extended into Asian markets, where semiconductor firms faced steep losses. Euronews reported that South Korean chipmaker SK hynix dived more than 7% and Japanese firm Kioxia shed a similar amount. Analysts suggested that while demand for AI remains, high funding costs and credit risks could eventually force these companies to slow their infrastructure build-outs.

Background

The downturn follows a period of high optimism earlier in the week, during which AI giant Anthropic reported a 1,300% revenue surge in its IPO filing and SK hynix announced a 632% jump in operating profit. However, these gains were overshadowed by rising concerns that the billions of dollars being poured into AI data centers may not produce quick enough profits.