US tech stocks tumbled for a second consecutive day on Friday as investors grew increasingly concerned about the hundreds of billions of dollars major technology firms are pouring into artificial intelligence. The Nasdaq composite index, which tracks the largest technology companies listed in the United States, sank more than 3.5 percent during the session.
Alphabet and Intel Lead Market Decline
The sell-off was led by significant losses in shares of Alphabet, the parent company of Google, and chipmaker Intel. Alphabet shares had already plunged by more than 12 percent on Thursday after the company revealed that its new AI-generated search summaries were cannibalizing its core search advertising revenue. The stock continued to slide in early Friday trading, down 2.2 percent.
Intel faced even steeper losses, with shares plummeting by as much as 30 percent on Friday. The chip manufacturer announced plans to increase its AI-related spending despite facing weaker demand for personal computers, a traditional source of revenue for its microprocessors. Intel reported that it did not expect to generate more cash than it spent this year and forecast lower-than-expected revenue for the fourth quarter.
David Zinsner, Intel’s finance chief, stated in the company’s third-quarter earnings report that the PC slowdown was expected to continue at least through the first half of next year. He noted that the firm had significantly ramped up investment in equipment during the third quarter and anticipated even more substantial spending in the following three months.
Earnings Misses Fuel Bubble Fears
Investor anxiety is being driven by a disconnect between massive capital expenditures and current earnings performance. Major technology companies, including Meta, Oracle, Amazon, Microsoft, and Alphabet, have collectively committed to spending $800.6 billion in 2026 on AI infrastructure. However, recent earnings reports have failed to meet analyst expectations, sparking fears of an AI investment bubble.
Amazon shares fell as much as 6 percent in overnight trading after the company reported earnings that missed investor targets. Amazon revealed that its cash outflows had increased six-fold over a three-month period, with total spending for the year projected to reach $220 billion. These funds are directed toward AI data centers, network equipment, and servers. Although shares recovered slightly from their overnight lows, they remained down about 1.6 percent in Friday trading.
Other technology stocks also suffered significant declines. Reddit shares dropped by 26 percent after the social media platform reported weaker-than-expected daily user figures and warned that Google’s AI-driven search capabilities were reducing referral traffic to its site. Online gaming platform Roblox saw its stock fall by nearly 20 percent as its daily active user numbers decreased.
Chris Low from investment management firm FHN Financial told Reuters that the market reaction was largely driven by the performance of the largest tech players. He described the situation as significant growing pains as companies aggressively pursue AI build-outs, suggesting that these signs indicate the entire sector might slow down.
Kathleen Brookes, research director at trading firm XTB, noted that investors have become ruthless in punishing any signs of disappointment in third-quarter earnings. She observed that while the AI trade has performed well in recent years, investors are now demanding immediate payback, leaving companies like Alphabet and Intel in the crosshairs.
Despite the recent volatility, stock market values for many of these companies remain higher than they were a year ago. The Nasdaq is up 7.6 percent over the last 12 months, and Amazon is up nearly 7 percent. Alphabet, however, is down 1.6 percent over the same period. Brookes added that November is typically a strong month for stocks, but if AI stocks continue to struggle, it could suggest the trade has passed its peak and investors will look for new market themes.
Source: BBC
