U.S. stocks continued to fall on Friday as investors grew increasingly concerned about the rising cost of developing artificial intelligence (AI) and questioned whether major technology companies will earn sufficient returns from their investments.
Intel shares plunge as PC market weakens
Intel shares fell as much as 30% overnight and in early trading on Friday after the chipmaker warned of a downturn in the computer market despite plans to increase AI-related spending.
The company was on track to lose more than $130 billion in market value after its earnings report unsettled investors. On Thursday, Intel finance chief David Zinsner said he did not expect the company to generate more cash than it had spent this year. He also said fourth-quarter sales were expected to be lower than previously anticipated.
“Looking ahead, the slowdown in PC sales will continue at least through the first half of next year,” Zinsner said during the semiconductor maker’s third-quarter earnings report.
During the earnings call, he said Intel had significantly increased capital spending in the third quarter and expected that investment to “be even bigger” over the next three months.
Nasdaq falls as technology stocks decline
The tech-heavy Nasdaq opened at its lowest level in two months on Friday, falling 2.5%. Other technology stocks, including Reddit and Roblox, also continued to decline.
The broader sell-off followed a drop of more than $500 billion in Alphabet’s market value on Thursday. The Google owner said its AI-generated summaries were affecting revenue from its core search advertising business.
Alphabet shares fell a further 1% in early trading on Friday after Thursday’s sharp decline.
Amazon spending raises investor concerns
Amazon shares briefly dropped 6% on Thursday night after the company reported earnings that fell short of investor expectations. The stock later recovered some of its losses but was still down about 1.6% in Friday trading.
Amazon said on Thursday that it was also spending more of the cash it generates, with spending increasing six-fold over three months.
Several major technology companies, including Microsoft, reported earnings this week. Analysts said the results raised questions about the potential returns from the industry’s large investments in AI.
Reddit and Roblox shares fall
Reddit shares fell 26% after the social media company reported weaker-than-expected daily user numbers. It also warned that Google’s expansion of AI-driven search was reducing referral traffic.
Shares in online gaming platform Roblox fell by nearly 20% after the company reported a decline in daily active users.
Analyst warns of possible sector-wide slowdown
Chris Roe of investment management firm FHN Financial said much of the market reaction was linked to results from major technology companies such as Amazon and Google.
He told Reuters that both companies were “exhibiting some pretty significant growing pains as we aggressively push forward with AI enhancements.”
“These signs may suggest a sector-wide slowdown,” he said.
Source: www.bbc.co.uk