A sell-off for tech stocks is getting worse Friday on worries that Wall Street’s frenzy around artificial-intelligence technology sent prices too high
The S&P 500 dropped 2.2% and was heading toward its worst day since June and a third straight losing week. The weakness for technology stocks dragged the Nasdaq composite down a market-leading 3.4%, as of 2:15 p.m. Eastern time, while the Dow Jones Industrial Average was down 634 points, or 1.2%.
The U.S. stock market remains only 3.4% below its all-time high, which has boosted the value of workers’ 401(k) accounts, but it’s become increasingly shaky just days before Tuesday’s midterm elections in the United States. Worries about AI in general have already become a bipartisan concern for voters, and President Donald Trump has historically used the stock market’s performance as a measure of his own success.
Intel’s stock led the way lower
Intel’s stock led the way lower and is flirting with the worst day in its history, which goes back to1972, after tumbling 30.9%. The chipmaker gave a forecast for profit in the final three months of this year that fell short of analysts’ expectations, as CEO Lip-Bu Tan said the personal-computer industry continues to feel pressure. The drop came even though Intel reported a stronger profit for the latest quarter than analysts expected.
Amazonsank 2.1% after reporting a weaker profit for the summer than analysts expected. Potentially more concerning for investors was Amazon’s reporting that it burned through $42.4 billion of cash over the prior 12 months, according to a measure called free cash flow. It spent $94.8 billion on property and equipment, primarily through investments in artificial-intelligence technology.
A day earlier, Alphabet’s stock dropped more than 12% to its worst day on record and dragged the S&P 500 lower after telling investors it burned through more cash during the summer than the spring. The company behind Google and YouTube cited similar, mammoth investments in AI.
Worries are rising about whether all those hundreds
Worries are rising about whether all those hundreds of billions of dollars will produce enough profit and productivity to make the investment worth it. At the same time, stocks of computer chip companies and other winners from the frenzy to build AI data centers have come under pressure on concerns that high interest rates may slow the further build out of data centers.
“We’re moving out of the hopes and dreams phase of the AI trade and into the ‘show me’ phase,” said Joe Tigay, portfolio manager at Equity Armor Investments, in a note to investors.
