Stocks fall on AI cash burn worries while bonds rally with oil

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NEW YORK/LONDON, Oct 30 (Reuters) – A sharp selloff in Wall Street’s tech shares pushed MSCI’s global index down more than 1% on Friday, sending investors to the safety of US bonds on fears that hefty cash-burning AI investments ‌may not deliver sufficient returns.

Shares in chipmaker Intel plunged 28% and Amazon shares were off 1.9% after their results each showed they burned through ‌cash while investing heavily in AI-related development. Intel also said PC demand had slowed, and that it could persist through next year.

Shares in Google parent Alphabet, after falling 12.6% on Thursday, extended losses ​on Friday. Its massive AI spending turned the company cash flow negative while its search business faced stiff competition.

It’s really been a horror show this morning

“It’s really been a horror show this morning and the real villain is AI spending,” said Gene Goldman, chief investment officer at Cetera, saying the heavy cash burn and elevated capex are prompting questions about whether the AI returns will “justify the outlays.”

Goldman also said pressure from rising oil prices due to more attacks in the Middle East and concerns about a hack at Binance, the ‌world’s biggest cryptocurrency exchange, added to the gloom. Bitcoin ⁠and other cryptocurrency prices fell.

Outside tech, other sectors were holding up, particularly energy, which rose following results from Exxon Mobil and Chevron. The oil majors posted strong profits due to big refining margins driven by supply disruptions from Ukrainian attacks ⁠on Russian refineries and the US-Israel war on Iran. Shares rose 1.3% and 3%, respectively.

On Wall Street at 12:09 p.m

On Wall Street at 12:09 p.m. ET (1609 GMT), the Dow Jones Industrial Average fell 384.61 points, or 0.73%, to 51,957.95, the S&P 500 fell 124.20 points, or 1.61%, to 7,595.93 and the Nasdaq Composite fell 684.06 points, or 2.61%, to 25,500.67.

MSCI’s gauge of ​stocks ​across the globe fell 15.62 points, or 1.4%, to 1,117.00.

The pan-European STOXX 600 index fell ​0.46%.

In currencies, the yen headed for a third daily gain ‌on Friday after the Bank of Japan held rates steady but revised up its inflation forecast, while a fresh wave of selling in AI shares triggered demand for non-dollar safe havens.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.03% to 101.85, with the euro down 0.07% at $1.117.

Against the Japanese yen, the dollar weakened 0.2% to 157.37.

Bitcoin fell 1.80% to $77,424.37.

US Treasuries rose, putting benchmark 10-year yields on track for their biggest monthly decline since late 2023, as the tech-stock selloff pushed investors into safe havens.