Tech Sell-Off Erases Nearly $1 Trillion in U.S. Market Value Amid Earnings Concerns

A technology-led selloff that intensified this week following disappointing earnings from major tech firms drove U.S. markets down by hundreds of billions of dollars on Friday. The broader decline has shaved nearly $1 trillion off the tech-heavy Nasdaq in a single week and erased roughly $2 trillion over the past month.

The S&P 500, which tracks the 500 largest U.S. companies, fell more than 1% on Friday, wiping out hundreds of billions of dollars in market value. The index was on track to erase its October gains despite setting an all-time high during the same month. Weakness in technology stocks pulled the Nasdaq Composite down even further, with a drop exceeding 3% and additional billions in lost value. The Dow Jones Industrial Average fell by a smaller margin.

The Nasdaq 100 is set to lose more than $2 trillion in market value this month, as big-tech earnings intensified investor scrutiny over whether billions of dollars in artificial intelligence spending can generate returns quickly enough.

Those losses would slightly exceed the entire market value of SpaceX. The index has fallen more than 5.8% so far in October as the AI trade ran into turbulence, with hyperscalers Meta Platforms, Alphabet, and Amazon raising spending forecasts further as they race to expand AI infrastructure.

Intel tumbled nearly 30% and flirted with its worst day since 1974, even though the chipmaker reported stronger profit for the latest quarter than analysts expected. It issued a profit forecast for the final three months of the year that fell far short of analysts’ expectations.

Amazon fell 1.8% after reporting weaker profit for the summer than analysts expected. The company also disclosed that it had spent more this year than anticipated.

A day earlier, Alphabet’s stock dropped more than 12%, wiping $500 billion from its market capitalization in its worst day on record, after telling investors that it burned through more cash during the summer than the spring because of similarly mammoth investments in AI.

Worries are rising about whether all those hundreds of billions of dollars will produce enough profit and productivity to make AI investment worthwhile. At the same time, stocks of computer chip companies and other beneficiaries of the frenzy to build AI data centers have come under pressure on concerns that high interest rates may slow further data-center construction.

A 3.1% drop for Nvidia, previously worth about $5 trillion and the poster child of the AI frenzy, was the heaviest force pulling the S&P 500 downward.

Such losses overshadowed an otherwise mixed day for the rest of Wall Street, with the S&P 500 roughly evenly split between gainers and losers.

Expectations remain high broadly for U.S. companies’ ability to deliver bigger profits, even though people around the world feel discouraged by high inflation and high fuel prices. Those expectations helped drive the S&P 500 to its record earlier this month.

Source link