A sell-off of tech stocks that began earlier this month and gained steam with disappointing earnings from leading tech companies drove US markets down by hundreds of billions of dollars Friday. In total, the decline has knocked nearly $۱tn in value off the tech-heavy Nasdaq exchange in one week and erased about $۲tn in a month.
The S&P ۵۰۰, the index of the ۵۰۰ most valuable companies in the US, fell by more than ۱% Friday, losing hundreds of billions of dollars in market value. It was on track to erase its gain for October, even though it set its all-time high during the same month. The weakness for technology stocks dragged the Nasdaq composite down even further, more than ۳%, also erasing hundreds of billions in value. The Down Jones Industrial Average fell less.
More than $۲tn in market value is set to be wiped from the Nasdaq ۱۰۰ this month, as big tech earnings intensified investor scrutiny of whether the billions being poured into artificial intelligence can generate returns quickly enough.
The wipeout would amount to slightly more than SpaceX’s entire market value. The index has fallen more than ۵.۸% so far in October as the AI trade ran into turbulence, with hyperscalers Meta Platforms, Alphabet and Amazon raising spending forecasts further as they race to expand AI infrastructure.
Intel tumbled nearly ۳۰% and is flirting with its worst day since ۱۹۷۴, even though the chipmaker reported a stronger profit for the latest quarter than analysts expected. It gave a forecast for profit in the final three months of this year that fell far short of analysts’ expectations.
Amazon fell ۱.۸% after reporting a weaker profit for the summer than analysts expected. The company also disclosed that it had spent more this year than anticipated.
A day earlier, Alphabet’s stock dropped more than ۱۲%, wiping $۵۰۰bn from its market capitalization, to its worst day on record after telling investors that it burned through more cash during the summer than the spring because of similar, mammoth investments in AI.
Worries are rising about whether all those hundreds of billions of dollars will produce enough profit and productivity to make AI investment worth it. At the same time, stocks of computer chip companies and other winners from the frenzy to build AI datacenters have come under pressure on concerns that high interest rates may slow the further build out of data centers.
A drop of ۳.۱% for Nvidia, previously worth about $۵tn, whose chips have made it the poster child of the AI frenzy, was the heaviest force pulling the S&P ۵۰۰ downward.
Such losses overshadowed an otherwise mixed day for the rest of Wall Street, with the S&P ۵۰۰ roughly evenly split between gainers and losers.
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Expectations are high broadly for US companies’ ability to make bigger profits, even though people around the world are feeling discouraged about high inflation and high fuel prices. Such expectations are what drove the S&P ۵۰۰ to its record earlier this month.
The Associated Press contributed reporting
