Tech stocks fell sharply as major companies report heavy artificial intelligence spending without proportional earnings gains. Intel shares dropped 28% on Friday after the chip maker said it would not bring in more cash than it spent this year and forecast lower-than-expected revenue for its fourth quarter. Alphabet's stock fell another 1.4% on Friday following a 12% plunge on Thursday, after the company revealed that AI-generated search summaries are hurting its core search advertising revenue. The company expects to spend up to $205bn this year on AI investments.
Amazon shares fell 1.4% at the end of Friday trading after the company revealed it had spent more cash than it made, with spending increasing six-fold over three months. Amazon has committed to spending $220bn this year on AI data centres, network equipment and servers. Reddit stock plunged 29% after the platform reported weaker-than-expected daily user figures and warned that Google's AI-driven search is hurting referral traffic.
The Nasdaq index ended October with its worst monthly slide since March 2025, closing 2.8% lower on Friday. Meta, Alphabet, Oracle, Amazon and Microsoft have committed to spending $800bn between them in 2026 on AI.
Kathleen Brookes, research director at trading firm XTB, said investors have turned "ruthless, punishing any signs of disappointment in third quarter earnings." She noted that if AI stocks continue to struggle, "it could suggest the AI trade is past its peak, and investors will be looking for a new theme to drive markets."
Chris Low from investment management firm FHN Financial told Reuters the biggest tech players were "showing some pretty significant growing pains as they aggressively pursue the AI build-out."