Nasdaq loses nearly $1tn in a week as worries over AI returns grow

Intel plunges nearly 30% toward worst day since 1974 on disappointing outlook

A sell-off of technology stocks that began earlier in October gained steam on Friday, when disappointing earnings from Intel and Amazon drove US markets down by hundreds of billions of dollars. The decline has knocked nearly $1tn in value off the Nasdaq in one week and erased about $2tn over the past month.

The S&P 500, the index of the 500 most valuable companies in the US, fell more than 1% on Friday, losing hundreds of billions of dollars in market value. The benchmark was on track to erase its gain for October, even though it set its all-time high during the same month. The Nasdaq composite, dragged down by the weakness in technology stocks, fell more than 3%, also erasing hundreds of billions of dollars in market value, while the Dow Jones Industrial Average fell less.

As of Friday, the Nasdaq Composite stood at 26,184.72 and the S&P 500 at 7,743.98, according to Federal Reserve Economic Data maintained by the St. Louis Fed.

More than $2tn in market value is set to be wiped from the Nasdaq 100 this month — a total that would amount to slightly more than SpaceX’s entire market value. The index has fallen more than 5.8% so far in October as the AI trade has run into turbulence, with hyperscalers Meta Platforms, Alphabet and Amazon raising their spending forecasts further as they race to expand AI infrastructure.

Intel tumbled nearly 30%, flirting with its worst day since 1974, even though the chipmaker reported a stronger profit for the latest quarter than analysts had expected. The company instead gave a forecast for profit in the final three months of the year that fell far short of analysts’ expectations.

Amazon fell 1.8% after reporting a weaker profit for the summer than analysts had expected. The company also disclosed that it had spent more this year than it had anticipated.

The previous day, Alphabet’s stock dropped more than 12%, wiping $500bn from its market capitalization in its worst day on record, after the company told investors that it burned through more cash during the summer than in the spring because of similar, massive investments in AI.

Shares of Nvidia, the chip company whose products have made it a symbol of the AI frenzy, fell 3.1%. Previously worth about $5tn, the company saw its drop become the heaviest force pulling the S&P 500 downward.

Underlying the selling are rising worries about whether the hundreds of billions of dollars going into AI will produce enough profit and productivity to make the investment worthwhile. At the same time, stocks of computer chip companies and other winners from the rush to build AI data centers have come under pressure on concerns that high interest rates may slow the further build-out of data centers.

Friday’s losses overshadowed an otherwise mixed day for the rest of Wall Street, with the S&P 500 roughly evenly split between gainers and losers.

Expectations remain broadly high for US companies’ ability to make bigger profits, even though people around the world are feeling discouraged about high inflation and high fuel prices. Those expectations are what drove the S&P 500 to its record earlier this month.