US technology stocks faced a significant downturn this past week, with nearly $1 trillion wiped off the Nasdaq’s market value. This decline was driven by disappointing earnings reports and rising concerns about the profitability of investments in artificial intelligence infrastructure, leading to a broad market sell-off.
The S&P 500 experienced a drop of more than 1%, threatening to negate its gains for October, while the Nasdaq Composite fell over 3%. The Dow Jones Industrial Average also saw declines, although its losses were smaller in comparison.
Investors are increasingly skeptical about whether major tech companies can achieve the expected returns from their substantial investments in AI. The Nasdaq 100 has already fallen by over 5.8% in October, reflecting these concerns. Among the hardest-hit companies was Intel, whose shares plunged nearly 30% after issuing a weaker-than-expected profit forecast for the final quarter of the year, despite exceeding quarterly earnings expectations.
Amazon also saw its stock decline by 1.8% following reports of lower-than-anticipated summer profits and higher spending levels. Meanwhile, Alphabet’s shares tumbled more than 12% in a previous trading session, erasing approximately $500 billion from its market value, after revealing increased spending on AI initiatives.
Despite these setbacks, major technology firms like Meta, Alphabet, and Amazon continue to raise their investment forecasts in a bid to expand AI infrastructure and data-center capacities. However, investor confidence is wavering as questions arise about the potential for these investments to deliver sufficient profits and productivity gains.
Adding to the market pressures, Nvidia shares fell by 3.1%, contributing to the S&P 500’s downward trend and reflecting broader concerns that high interest rates could impede the expansion of data centers, potentially weakening demand for companies benefiting from the AI boom.
This market volatility underscores a growing uncertainty about the profitability of AI investments, even as expectations for corporate earnings growth across the US economy remain strong.