Tech stocks wipe $1.5 trillion as AI spending faces scrutiny
A sharp sell-off hit technology shares on Friday as investors questioned whether heavy artificial-intelligence spending will produce returns. The Nasdaq 100…
Technology stocks shed more than $1 trillion in value on Friday as investors questioned whether massive artificial intelligence spending will deliver returns. The Nasdaq 100 fell 3.4% in afternoon trading, its steepest one-day drop since mid-June, while Intel plunged 29% after warning that fourth-quarter profits and sales would fall short of expectations.
The retreat deepened pressure on a market already rattled by major technology companies’ plans to spend hundreds of billions of dollars on AI data centers. Investors are looking for evidence that the investment can translate into revenue and profit, rather than simply adding to companies’ costs.
Why are tech stocks falling?
Amazon and Intel reported quarterly earnings on Thursday that failed to reassure investors and analysts. Amazon’s spending on AI continued at a faster pace than expected last quarter, while growth in its core online shopping business slowed.
Amazon shares fell as much as 10% in post-market trading Thursday before recovering during Friday’s session. They closed down 1.4%. Intel’s weaker outlook for the fourth quarter triggered a much steeper slide.
The losses spread across the sector. The S&P 500 fell 1.8%, while its technology sector dropped more than 4.2%, making it the index’s worst-performing sector of the day. The Nasdaq Composite declined 2.8%.
Chipmakers also took a hit. SanDisk fell 13%, while AMD, ARM Holdings, Qualcomm and Marvell each dropped around 10%. The Philadelphia semiconductor index sank 7.2%, and the DRAM exchange-traded fund, which tracks companies linked to computer memory and storage, lost 7%.
Investors demand proof of AI returns
The concern reaches beyond chip companies. Alphabet lost about $500 billion in market value on Thursday, its worst day on record, and its shares fell another 1.4% on Friday. Investors have questioned the pace of AI spending and the outlook for Google’s search advertising business.
Amazon Chief Executive Andy Jassy told shareholders on Thursday that the company still expects 2026 capital expenditures of approximately $220 billion, with most of that spending going to Amazon Web Services. He said the company expects to spend meaningfully more in 2027.
That commitment comes as investors scrutinize whether spending on AI is producing measurable gains. Some companies that pay to use AI models have tightened their token budgets, while others have questioned the benefits they are getting from adopting the technology.
The shift matters because the spending plans are large enough to put pressure on company finances if returns take time to arrive. For investors, earnings and cash generation now carry more weight in judging whether AI expansion is paying off.
Intel’s sell-off followed its warning that fourth-quarter profits and sales would be lower than expected. Chief Executive Lip-Bu Tan cited supply-chain issues as one factor behind the company’s weak quarterly performance.
“We’re moving out of the hopes and dreams phase of the AI trade and into the ‘show me’ phase,” Joe Tigay, portfolio manager at Equity Armor Investments, said in a note.
