U.S. technology stocks experienced a sharp decline on Friday, extending a broader sell-off driven by investor concerns over artificial intelligence (AI) investments and their potential returns. The Nasdaq Composite, heavily weighted with tech firms such as Apple, Nvidia, Alphabet, and Microsoft, dropped by approximately 3.5%, wiping out nearly $1 trillion in market value over the past week and erasing about $2 trillion in a month. The broader S&P 500 fell 1.8%, marking its worst day since June, while the Dow Jones Industrial Average declined 1.1%, losing 572 points.
The sell-off intensified following earnings reports and forecasts from major AI-focused companies that failed to meet or clearly exceed market expectations. In particular, chipmaker Intel's shares plunged nearly 29%, marking their steepest drop since 1974, after it forecasted weaker-than-expected profit for the final quarter despite reporting a quarterly profit above analyst estimates. Intel’s stock has now declined by roughly half since its all-time high in June.
Amazon also contributed to the market downturn, falling around 1.4% to 1.8% after reporting a weaker summer profit and revealing substantial cash outflows of $42.4 billion over the past year, largely due to investments in AI infrastructure. Similarly, Alphabet experienced steep losses after disclosing heavy cash burn during the summer aligned with its AI spending, resulting in a more than 12% drop in its share price—the worst day ever for the company—taking it about 30% below its peak and pushing it into bear market territory. Other major AI-related firms like Meta Platforms, Oracle, and Arm Holdings have also seen share prices fall by 20% or more from their highs.
Investor sentiment appears to be shifting from enthusiasm to caution as questions arise about whether the massive expenditures on AI data centers and infrastructure will translate into timely and sufficient profits. Market strategists noted that the shift represents a move from hopeful speculation to a demand for tangible returns. Some market participants emphasized that, despite losses in technology stocks, other sectors showed relative resilience. Energy companies like ExxonMobil and Chevron posted gains after strong summer earnings, as did consumer staples firms such as Mondelez International and Colgate-Palmolive, which benefited from pricing power amid inflation.
Outside the United States, markets were mixed. South Korea’s Kospi index dropped 3.5%, impacted by AI-related fears in its technology sector, while Hong Kong’s Hang Seng rose 1.5%. Japan’s Nikkei 225 fell 2.1% as the Bank of Japan maintained steady interest rates, mirroring decisions by the Federal Reserve and the European Central Bank earlier in the week.
Bond markets showed signs of seeking safer assets, with the 10-year U.S. Treasury yield declining to 4.93% from 4.98% the previous day, despite rising oil prices. Brent crude rose 2.4% to $113.45 a barrel, near highs last seen amid geopolitical tensions.
The current market turmoil unfolds as investors approach the U.S. midterm elections, a period historically associated with increased volatility and political uncertainty. While the S&P 500 remains close to its all-time high reached earlier in October, the recent declines underscore growing skepticism about the pace and profitability of AI investments across the technology sector.