Technology stocks plunged Friday morning, putting the Nasdaq 100 index on track for a decline of more than $1 trillion. In early trading, the index fell 3%, which would be its worst one-day decline since mid-June.
Shares of Amazon, which fell 3%, and Intel, which plunged 30%, triggered the declines. Both companies released quarterly results this week that failed to reassure investors and analysts.
By the end of Thursday’s session, Amazon had fallen as much as 10%.
The broader S&P 500 index also fell more than 1.2%. The technology sector of the index was by far the worst performer on Friday, falling more than 3.5%.
As trillion-dollar tech companies raise and spend hundreds of billions of dollars to build massive artificial intelligence data centers and develop AI models, investors are looking for clear signs that all this spending is actually generating returns on investment.
On Thursday, Amazon said its spending to develop AI continued at a faster-than-expected pace last quarter, while growth in its core online shopping business slowed.
The last time Amazon told investors it was increasing its AI spending budget, the market rewarded the move by sending its shares up more than 15%.
But a lot has changed in the last three months. Some of the big companies that pay to use AI models have cut their token budgets. Others have raised questions about exactly how much they benefit from the time and resources they spend adopting AI.
In response, some investors are now viewing big tech’s massive spending on AI through a more skeptical lens.
Still, Amazon CEO Andy Jassy on Thursday asked shareholders to prepare to spend even more.
“We still forecast cash flow (capital expenditures) of approximately $220 billion for 2026, the majority for AWS, and expect to spend significantly more in 2027,” he said during the company’s earnings call. Amazon’s spending was already expected to double from 2025.
Intel, meanwhile, told investors that its fourth-quarter profits and sales would be lower than expected, sending the stock lower.
Friday’s losses follow heavy selling of Alphabet shares on Thursday.
Google’s parent company lost about $500 billion in market value – its worst day ever and the second-worst loss in value in market history. On Friday, the stock fell another 1%.
The Philadelphia Semiconductor Index, of which Intel is a member, fell 6% on Friday. Other major chip stocks followed Intel lower.
The “DRAM” ETF, which tracks companies related to computer memory and storage, fell 5%.
The Nasdaq Composite, which tracks all companies listed on that exchange, fell 2.2%.
Intel shares have surged in recent months as its management implements a sweeping overhaul of the long-struggling chip company.
Amid this turnaround, the U.S. government took a stake in the company, making the federal government the company’s largest shareholder.
Even taking into account the drop expected on Friday, the value of the government’s stake in Intel increased by 280%.
Citigroup analysts described the report as “two steps forward, one step back.”
A major issue highlighted by Intel CEO Lip-Bu Tan that contributed to the company’s lackluster performance during the quarter was supply chain issues.
“I am disappointed that we were unable to meet strong customer demand during this quarter,” Tan told investors during the company’s earnings conference call. “We face near-term challenges including manufacturing, supply shortages, the unprecedented memory crisis and resulting weak PC demand.”
At the same time, one of the side effects of the selloff in tech stocks has been the rally in U.S. Treasuries.
Tech companies borrowing hundreds of billions to build AI data centers have tapped debt markets for funds, appearing to create competition for capital.
Because these companies often offer better rates than the U.S. government, Treasury yields have partly risen in recent months.
On Friday, the benchmark 10-year U.S. Treasury yield, which heavily influences consumer borrowing rates, rose to around 4.89% from just under 5% on Thursday.
Gn headline
