US technology stocks faced a significant downturn as concerns over artificial intelligence investments and disappointing earnings reports triggered a massive sell-off, erasing nearly $1 trillion from the Nasdaq’s market value within a week. Over the past month, the losses have approached $2 trillion, highlighting investor apprehensions about the profitability of AI spending.
The Nasdaq Composite plunged over 3%, while the S&P 500 fell more than 1%, threatening to negate its October gains. The Dow Jones Industrial Average also dipped but recorded smaller losses. This market turbulence underscores investor skepticism about whether major tech companies’ substantial investments in AI infrastructure will yield sufficient returns.
Intel’s shares saw a steep decline of nearly 30% after the company forecasted lower-than-expected profits for the final quarter, despite reporting stronger-than-anticipated earnings for the previous quarter. Amazon shares dropped by 1.8% following reports of lower-than-expected summer profits and higher spending forecasts. Alphabet’s stock fell more than 12% in the previous session, causing a $500 billion wipeout in market value, as the company revealed increased cash spending on AI initiatives.
Major technology firms like Meta, Alphabet, and Amazon are raising their investment forecasts to expand AI infrastructure and data center capacities. However, investor confidence is waning over whether these initiatives will translate into enhanced profits and productivity.
Adding to the market pressure, Nvidia shares declined by 3.1%, reflecting broader concerns that elevated interest rates might decelerate data center expansion and weaken demand for AI-driven companies.
This market downturn highlights the growing uncertainty surrounding the profitability of AI investments, despite strong expectations for overall corporate earnings growth in the US economy.