A second day of heavy selling
US technology stocks fell for a second consecutive day on Friday, as worries grew about the hundreds of billions of dollars companies are pouring into artificial intelligence, the BBC reported. The Nasdaq index of the largest US-listed tech firms sank more than 3.5%.
Intel was the biggest faller, with its shares down by as much as 30%. The chip maker was on track to lose more than $130bn in value. The drop followed a Thursday in which Alphabet, the owner of Google, lost more than $500bn in market value. Reddit and Amazon also declined.
According to the BBC, the common thread was that tech firms are spending heavily on AI while their earnings do not always meet analysts' expectations. That has unsettled investors and revived fears of an AI bubble.
Company by company
Alphabet's shares fell on Thursday after the company said the AI summaries it now shows as the top answer to search queries were affecting its core search advertising revenue. The company also expects to spend up to $205bn this year on investments, almost entirely related to AI. Its stock was down a further 2.2% in early Friday trading, after Thursday's slide of more than 12%.
Intel said it planned to increase AI spending even though demand for computers, a major source of demand for its processors, has weakened. Finance chief David Zinsner said the company did not expect to bring in more cash than it spent this year and forecast lower-than-expected fourth-quarter revenue. In the third-quarter earnings report he said: "Looking ahead, we see the PC slowdown continuing at least through the first half of next year." He also said investment in equipment, which rose significantly in the third quarter, was expected to be "even more significant" in the following three months.
Amazon's reported earnings fell short of expectations. The company said it had also spent more cash than it was making, with spending up six-fold over three months. It has committed to $220bn this year for AI data centres, network equipment and servers. Its shares fell as far as 6% in overnight trading before recovering to be down about 1.6% on Friday.
Reddit fell 26% after reporting weaker-than-expected daily user numbers and warning that Google's growing AI-driven search was hurting referral traffic. Roblox fell by nearly 20% as its daily active users dropped.
What analysts are saying
Several major tech companies, including Microsoft, have reported earnings this week, and analysts said questions were building about the payout from the investment. The BBC reported that Meta, Alphabet, Oracle, Amazon and Microsoft have committed to spending $800.6bn between them in 2026.
Chris Low of investment management firm FHN Financial told Reuters that the biggest tech players were "showing some pretty significant growing pains as they aggressively pursue the AI build-out." He added: "The thinking is that these signs suggest that the entire sector is going to slow down."
Kathleen Brookes, research director at trading firm XTB, said: "Investors have turned ruthless, punishing any signs of disappointment in [third quarter] earnings." She added: "The AI trade has had a good run in recent years, but now investors want payback, and companies like Alphabet and Intel are in the crosshairs."
The bubble debate and the longer view
Many analysts have debated whether AI has inflated stock market values. The concern, as the BBC described it, is that some tech firms will not be able to justify their very high valuations if building AI data centres and developing software costs more than the revenue it brings in.
The BBC noted that many of these companies are still valued well above where they were a year ago. Despite Friday's fall, the Nasdaq is up 7.6% over the past year. Amazon is up nearly 7% over 12 months, while Alphabet is down 1.6%.
Brookes noted that November is typically a strong month for stocks. She said: "If we see AI stocks continue to struggle in the coming days, it could suggest the AI trade is past its peak, and investors will be looking for a new theme to drive markets."
