Tech Stocks Extend Sell-Off as Investors Question AI Spending Returns
U.S. technology shares fell for a second straight day as investors questioned whether companies can earn enough from their growing artificial intelligence…
U.S. tech stocks see sharp losses for a second straight day as investors question the returns on massive artificial intelligence spending. Intel shares fell as much as 30% on Friday, while the Nasdaq dropped more than 3.5%.
The sell-off has hit several companies, including Reddit and Amazon, as earnings and user figures have disappointed investors. The concern is that the industry’s costly AI expansion may not translate into enough revenue to support current valuations.
AI spending reaches hundreds of billions
Meta, Alphabet, Oracle, Amazon and Microsoft have committed to spending $800.6bn between them in 2026. The plans cover investment tied to artificial intelligence, including data centers, network equipment and servers.
Alphabet’s market value plunged on Thursday after the company said AI summaries, which now appear as the top answer to search queries, were affecting its core search advertising revenue. The company expects to spend up to $205bn this year on investments, almost entirely related to AI.
Alphabet shares fell more than 12% on Thursday and were down 2.2% in early trading on Friday. The move showed investors weighing the cost of expanding AI against pressure on a major source of the company’s income.
Amazon shares dropped as much as 6% in overnight trading after its reported earnings fell short of investor expectations. The company said on Thursday that it had spent more cash than it was making, with spending rising six-fold over three months. Its shares later recovered some ground but remained down about 1.6% in Friday trading.
Why did Intel shares fall?
Intel shares continued to slide on Friday, putting the chipmaker on track to lose more than $130bn in market value. The company said it planned to increase AI spending even as demand for computers weakened, a key source of demand for its micro-processors.
Intel finance chief David Zinsner said on Thursday that the company did not expect to bring in more cash than it spent this year. He also forecast lower-than-expected revenue for the fourth quarter.
“Looking ahead, we see the PC slowdown continuing at least through the first half of next year,” Zinsner said in Intel’s third-quarter earnings report. He also said the company had significantly increased equipment investment in the third quarter and expected it to be “even more significant” in the following three months.
The pressure extends beyond chipmakers and cloud companies. Reddit shares fell 26% after the social media platform reported weaker-than-expected daily user figures and warned that Google’s growing AI-driven search was hurting referral traffic. Roblox shares fell nearly 20% as its daily active user numbers dropped.
For investors, the market moves reflect a direct question about how technology companies will pay for AI expansion. High spending is arriving alongside weaker results or signs of slowing demand at some firms, while AI-generated search answers may also affect advertising revenue and traffic referrals.
Chris Low of FHN Financial said the market reaction centered largely on major technology companies such as Amazon and Google. They were “showing some pretty significant growing pains as they aggressively pursue the AI build-out,” he said. “The thinking is that these signs suggest that the entire sector is going to slow down.”
Analysts have also raised concerns that the cost of building AI data centers and developing software could exceed the money companies eventually earn from those investments. Kathleen Brookes, research director at XTB, said investors had seen many ups and downs in AI trading in recent months.
