Tech stocks in the US tumble amid doubts about AI investments
On the American stock market on October 30, sell-offs of technology company stocks intensified. Investors increasingly doubt that multibillion-dollar investments in artificial intelligence will provide expected profitability. The decline spread not only to individual corporations but also to semiconductor manufacturers and other companies associated with the development of AI infrastructure.
This was reported by Bloomberg and Financial Times.
During trading on Friday, the Nasdaq 100 index, which includes the largest non-financial companies on the American stock market, lost almost 3%. The broader S&P 500 index fell more than 1%, while Dow Jones showed a much smaller decline.
One of the main factors of the sell-off were the quarterly results of Intel and Amazon, released on October 29. Intel shares lost about 29% during Friday trading, and Amazon shares also sharply fell in price.
Intel disappointed investors with its fourth-quarter outlook. Despite 21% revenue growth for July-September to $16.5 billion, the company expects only $15-16 billion in the last quarter of the year, which turned out to be lower than analysts' forecasts.
According to Intel's official reporting, the manufacturer also faces weak demand for personal computers, production limitations, and the need for significant investments in capacity expansion.
No less telling was the market's reaction to Amazon's results. The company reported a 12% increase in quarterly revenue to $201.9 billion. Its cloud division AWS increased sales by 39% to $46 billion.
However, investors were concerned not so much with the pace of business growth as with its need for funding.
Over the past 12 months, Amazon's negative free cash flow of the negative variant negative free cash flow of the negative variant amounted to $42.4 billion. A year earlier, this figure had been positive and reached $14.8 billion. The main reason for the deterioration was massive investments in infrastructure, primarily for the development of artificial intelligence.
In the financial report, Amazon confirmed that it expects capital expenditures paid in cash in 2026 at a level of approximately $220 billion. The management also allows for a further increase in investments next year.
Thus, even the rapid growth of cloud services revenue did not dispel investors' concerns about the payback period of investments.
The sell-offs of the selloffs spread to companies that support AI infrastructure. According to Business Insider, the iShares Semiconductor exchange-traded fund, which tracks shares of semiconductor manufacturers, lost about 6%. The Roundhill Neocloud ETF with a glance focused on computing infrastructure providers, fell about 7%.
Investors fear two scenarios: technology corporations may either spend more on AI than this direction can generate profit, or they will be forced to reduce investments, which will negatively affect equipment manufacturers and data center operators.
Negative sentiment was formed even the day before. On Thursday, October 29, shares of Alphabet, the parent company of Google, fell more than 12% after the publication of financial results. The market capitalization of the corporation decreased by about $500 billion.
The decline in the US technology sector spread to international stock exchanges. According to the Financial Times, the Japanese Nikkei 225 index ended trading on October 30 down 2.1%, the South Korean Kospi lost 3.5%, and European technology stocks fell about 2.3%.
Amid the decline in risky assets, some investors increased investments in US and German government bonds. The growth in demand for these instruments contributed to a decrease in their yields.
In parallel, the situation in the cryptocurrency market worsened. Bitcoin dropped below $77 thousand after reports of a large-scale Binance hack, which heightened concerns about the security of digital assets. At the same time, however, the crypto market had its own factor of decline, not directly related to the financial reports of technology companies.
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