US stock market crash: Nasdaq falls 2.86% as Intel, Amazon fuel AI spending fears - The Statesman

Wall Street experienced a significant downturn on Friday, driven by investor concerns regarding the substantial investments technology firms are making in artificial intelligence (AI) and whether these expenditures can yield adequate returns in a timely manner. The Nasdaq Composite index fell by 2.86 percent, closing at 25,437.00, marking its largest single-day percentage drop since June 5. The S&P 500 index decreased by 1.82 percent to finish at 7,580.07, while the Dow Jones Industrial Average dropped 572.25 points, or 1.09 percent, concluding the day at 51,770.31.

This market decline followed disappointing quarterly reports from Intel and Amazon, which raised alarms about the financial strain associated with expanding AI infrastructure. Since reaching a record closing high on October 6, the Nasdaq has now decreased by 7.8 percent.

Investors are particularly anxious about the financial sustainability of AI investments. The core issue revolves around whether the substantial capital required for AI infrastructure development will be converted into profits within a timeframe that investors deem acceptable. Intel's warnings about its cash flow, alongside Amazon's ongoing plans for capital expenditures, highlighted the financial pressures that AI investments impose on these companies.

In its third-quarter earnings report, Amazon projected that its capital expenditures would approach approximately $220 billion by 2026. Despite an increase in operating cash flow, its trailing 12-month free cash flow stood at a negative $42.36 billion. These numbers have led to heightened scrutiny from investors regarding the correlation between AI spending, cash generation, and future profitability.

For companies whose market valuations are predicated on expectations of sustained growth driven by AI, even robust business performance may not satisfy shareholders if spending levels remain high.

Intel was one of the most affected stocks, experiencing a staggering 28.6 percent drop after its quarterly results and future outlook failed to meet investor expectations. This downturn affected the broader semiconductor market, with Nvidia falling by 4.2 percent and Advanced Micro Devices (AMD) seeing a decline of 10.9 percent. The overall semiconductor index fell by 7.2 percent, extending its losses in October to over 15 percent. Companies that provide computing infrastructure also faced declines, with Dell Technologies dropping 10.8 percent and HP down by 9.6 percent.

The widespread decline illustrated that worries about the financial implications of AI investments are not limited to individual tech firms but have also impacted chip manufacturers and hardware suppliers.

Despite a generally positive earnings season for many corporations, the technology sector's downturn persisted. According to data from the London Stock Exchange Group (LSEG) reported by Reuters, 82 percent of the 299 S&P 500 companies that had released their results surpassed analysts' expectations. Analysts anticipated year-on-year earnings growth of 31.6 percent for the quarter. Nonetheless, this strong earnings performance did little to halt the decline in tech stocks.

The S&P 500 technology sector experienced its most significant monthly percentage drop since March 2025, while the communication services sector recorded its worst monthly decline since April 2022. All three major U.S. stock indices ended the week in the negative, with the S&P 500 and Nasdaq also closing October down, although the Dow managed a monthly gain.

In addition to the technology sector's struggles, cryptocurrency-related companies faced pressure following reports of a hack that resulted in the theft of approximately $6.3 billion from Binance, the largest cryptocurrency exchange globally. Companies such as Coinbase, Strategy, and Robinhood saw their stock prices decline between 7.2 percent and 10.6 percent. This reported theft introduced further uncertainty for digital asset investors amid the ongoing selloff in technology stocks.

Looking ahead, the critical question for technology investors remains whether future earnings and cash flow will justify the current level of spending on AI. The outlook from Intel and Amazon's capital expenditure plans has intensified this inquiry. Investors will be closely monitoring whether technology firms can prove that their investments in chips, data centers, and computing infrastructure will generate sufficient financial returns. The recent market selloff suggests that Wall Street is becoming increasingly reluctant to endorse ambitious AI initiatives without clearer evidence of their potential economic benefits.