Tech stocks fell sharply for a second consecutive day as investors worry that massive artificial intelligence spending is not generating sufficient returns.
Intel shares plummeted 28% on Friday, shedding more than $130bn in market value. The chip maker said it did not expect to bring in more cash than it spent this year and forecast lower-than-expected fourth-quarter revenue, citing PC slowdowns. Intel's finance chief David Zinsner said "Looking ahead, we see the PC slowdown continuing at least through the first half of next year." Despite this, the company plans to increase AI spending.
Alphabet fell 1.4% on Friday, continuing a 12% drop on Thursday that erased over $500bn in market value. The company revealed that AI-generated summaries now shown as top answers in search results are hurting core search advertising revenue. Alphabet expects to spend up to $205bn this year, almost entirely on AI investments.
Reddit stock plunged 29% after reporting weaker-than-expected daily user figures and warning that Google's AI-driven search is reducing referral traffic. Roblox fell 18% as its active user numbers declined. Amazon shares dropped 1.4% after the company reported spending more cash than it earned, with spending increasing six-fold over three months. Amazon committed to $220bn in spending this year for AI data centres, network equipment, and servers.
The Nasdaq index ended October with its worst monthly performance since March 2025. Major tech companies including Meta, Alphabet, Oracle, Amazon, and Microsoft have collectively committed to spending $800bn on AI in 2026.
Analysts cited concerns that high spending on AI infrastructure may not generate profits commensurate with valuations. Chris Low from FHN Financial said the biggest tech players were "showing some pretty significant growing pains as they aggressively pursue the AI build-out" and that this suggested "the entire sector is going to slow down." Kathleen Brookes, research director at XTB, said investors have become "ruthless, punishing any signs of disappointment" in earnings. She noted that if AI stocks continue to struggle, "investors will be looking for a new theme to drive markets."