US tech stocks slide as investors fear rising AI costs
US stocks extended their fall on Friday as investors grew more worried about the soaring cost of building out artificial intelligence infrastructure. Chipmaker Intel was hit hardest, with shares dropping by as much as 30%.
Technology stocks on Wall Street continued to fall on Friday as investors grew increasingly concerned about the huge spending required to build out artificial intelligence (AI) infrastructure. The tech-heavy Nasdaq exchange opened 2.5% lower, at its lowest level in more than two months.
Intel shares drop by up to 30%
The biggest losses on Friday hit chipmaker Intel. Its shares fell by as much as 30% in early trading, putting the company on track to lose more than $130bn in market value. On Thursday, Intel's finance chief David Zinsner said the company did not expect to bring in more cash than it spent this year and forecast lower-than-expected revenue for the fourth quarter. He said the slowdown in the PC market would continue at least through the first half of next year. At the same time, Intel significantly increased its equipment investment in the third quarter and expects that spending to rise even more in the next three months.
Amazon, Alphabet, Reddit and Roblox
Shares in Amazon, the online retail and cloud computing group, fell by as much as 6% overnight after earnings reported on Thursday evening missed investors' expectations, before partly recovering; they were down about 1.6% on Friday. Amazon disclosed that it is spending more cash than it is making, with spending up six-fold over three months.
The value of Alphabet, the owner of Google, fell by more than $500bn on Thursday after it said its own AI summaries were affecting advertising revenue from its core search business. Its stock slipped a further 1% in early Friday trading.
Shares in social media platform Reddit dropped 26% after it reported weaker-than-expected daily user numbers and warned that Google's growing AI-driven search was hurting referral traffic. Online game platform Roblox fell by nearly 20% as its daily active user numbers declined.
Analysts question the payoff
Several major tech companies, including Microsoft, have reported earnings this week, and analysts say there are questions about the return on the massive AI investments. Chris Low of investment management firm FHN Financial told Reuters that much of the market reaction was a response to the biggest players, such as Amazon and Google, which he said were showing significant growing pains as they aggressively pursue the AI build-out. In his words, investors fear these signs point to a slowdown across the entire sector.
