Disappointing earnings from Alphabet, Amazon and Intel hit tech shares hard, sending the Nasdaq down 3.7% in afternoon trading Friday and reviving doubts about the AI boom, CBS News reported.
Technology stocks led a broad market decline Friday. According to CBS News, the Nasdaq Composite fell by more than 970 points, or 3.7%, in afternoon trading as investors grew more worried about the health of the tech sector.
The pain spread to other major indexes. The S&P 500 lost 183 points, or 2.4%, while the Dow Jones Industrial Average dropped 746 points, or 1.4%.
Individual names took heavy losses. Intel's stock plunged more than 30%. Reddit shares tumbled 30% and Roblox fell 20%. Alphabet, Google's parent company, continued to wobble after its Class A shares slid more than 12% on Thursday. That was the company's worst day since it went public as Google in 2004 and erased roughly $500 billion in market value.
The sell-off follows weaker-than-expected earnings from Alphabet, Amazon and Intel. Those reports are feeding concern that the huge sums companies are investing in artificial intelligence may not produce the returns Wall Street expects.
Investors are also focused on debt. Companies have been borrowing to pay for data center spending, and some market participants are questioning whether that borrowing is sustainable.
AI enthusiasm has been a major force behind the stock market's record highs, and investors have been counting on that growth to keep driving results. CBS News reported that this confidence is now under threat.
Adam Crisafulli, head of the research firm Vital Knowledge, described the earnings season in blunt terms. "This has been one of the worst tech earnings seasons in memory, with underwhelming results from a slew of very prominent companies," he said in a research note. In a separate report, he said the slump could go beyond market prices and hurt the industry itself by making it harder for companies to raise additional debt and equity.
Adam Turnquist, chief cross-asset strategist at brokerage firm LPL Financial, said in an email that "Mega-cap stocks have faced increased selling pressure over the past two weeks as elevated AI-related spending and rising financing costs raise concerns over the path to profitability." He added that recent earnings reports revealed slowing growth in the core businesses of some hyperscalers.
Earlier this week, Ulrike Hoffmann-Burchardi of UBS' Chief Investment Office advised clients to "diversify beyond AI." She said UBS keeps a constructive view on the long-term growth of AI, but that high expectations and potentially wide differences in company outcomes highlight the risks of concentrating in single stocks. "We think investors should ensure their equity portfolios are broadly diversified," she said.
Cryptocurrencies also fell. CBS News reported that hackers believed to be linked to North Korea stole more than $6 billion from Binance, the world's biggest crypto exchange. Bitcoin dropped toward $77,000, down from more than $86,000 earlier this month.
Despite the day's losses, U.S. stocks are only 3.4% below their all-time high. That level has helped lift the value of workers' 401(k) accounts, according to the report.
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