US tech stocks tumble as mounting artificial intelligence spending alarms investors

Technology shares across the United States dropped sharply on Friday as investors reacted with growing anxiety to the immense financial commitments required to develop artificial intelligence. The technology-focused Nasdaq index tumbled 2.5% at the opening bell, hitting its lowest position in over two months.

Chipmaker Intel experienced one of the steepest declines, with its stock plunging by as much as 30% during morning trading. The company is poised to shed upwards of $130 billion in market value following a disappointing quarterly report. Intel executives cautioned that demand in the personal computer market remains soft and warned that the downturn will persist into the middle of next year.

Speaking during an earnings presentation, Intel Chief Financial Officer David Zinsner indicated that the firm anticipates spending more cash than it generates throughout the current year, alongside projecting fourth-quarter revenue below Wall Street expectations. Zinsner noted that capital outlays on manufacturing gear accelerated substantially in the third quarter and would become even larger during the final three months of the year as the company scales up its AI infrastructure.

The sell-off extended to other major industry players, coming immediately after Google's parent company, Alphabet, suffered a historic drop exceeding $500 billion in market valuation on Thursday. Alphabet had disclosed that its implementation of AI-generated summaries was cutting into its primary search advertising revenue. Its shares slipped an additional 1% on Friday.

Amazon shares initially sank as much as 6% following earnings results that failed to meet investor projections, before stabilizing somewhat to trade down roughly 1.6%. The company reported a sixfold surge in expenditure over just three months, also revealing that its current spending surpasses incoming cash.

Smaller technology and digital media firms suffered steep declines as well. Shares in Reddit plummeted 26% after the discussion site reported softer daily user numbers and cautioned that changes in Google's AI-powered search results were diminishing inbound traffic. Meanwhile, gaming platform Roblox lost nearly 20% of its equity value amid declining daily active users.

Market analysts noted that this week's batch of corporate reports has raised serious doubts regarding when the massive capital outlays dedicated to artificial intelligence will begin generating meaningful profits. Chris Low of investment management firm FHN Financial told Reuters that major tech corporations are experiencing substantial growing pains during their rapid AI expansion, leading traders to suspect that the broader technology sector may face an impending slowdown.