US Tech Stocks Pull Back on Fears Over AI Costs, Intel Weighs on Nasdaq
Disappointing Intel earnings, setbacks for Alphabet and Amazon and record debt protection costs weigh on Wall Street
BY THE X-TRADER NEWS NEWSROOM · REPORTING FROM BBC BUSINESS · 3 MIN
US technology stocks registered sharp falls on Friday, in a move that, according to BBC Business, comes against the backdrop of concern about the costs of investments in artificial intelligence. The Nasdaq opened the day at its lowest level in more than two months, with a drop of 2.5%, and shares such as Reddit and Roblox also fell.
The most significant case was that of Intel. According to BBC Business, the company's shares fell by up to 30% in trading, in a path that could lead to the loss of more than US$130 billion in market value. The trigger was the third quarter balance sheet, released on Thursday, with revenue forecast for the fourth quarter below expectations. Bloomberg also points to the disappointing result as the main reason for the reaction.
According to BBC Business, financial director David Zinsner stated that the company does not expect positive cash flow this year and sees a slowdown in the PC market at least until the first half of the following year. At the same time, investment in equipment rose significantly in the third quarter and is expected to grow even more in the following three months, which exposes the dilemma of spending a lot before seeing a return.
The movement was not restricted to Intel. Amazon fell as much as 6% before recovering part of its losses, after a balance sheet released on Thursday night that was below expectations. Alphabet saw its market value drop by more than US$500 billion on Thursday, after revealing that AI summaries were affecting search ad revenue. On Friday, the company's shares were down around 1% at the beginning of trading.
In the credit market, the cost of protecting against default, as measured by CDS, broke records on Friday across several big U.S. technology names, according to Bloomberg. The CDS works as insurance on a company's debt, and its increase indicates that investors started to charge more to assume the risk of these companies.
The backdrop is the doubt about the return on billions invested in AI infrastructure. While spending on equipment continues to rise, the uncertainty about when and how much these expenses will generate revenue and cash has begun to weigh more heavily on quotes, and the fear even affects companies that are already feeling the effects of AI on their own business.
What changes for the investor
For those who invest and operate, the message is to pay attention to concentration. As the Nasdaq is heavily influenced by a few big names, a bad result in a single company can drag down the entire index, as happened on Friday. Anyone who follows interest rates and the dollar should observe whether the pressure on CDS continues, as it shows how the credit market starts to price the risk of these companies. This article does not provide a purchase or sale recommendation or price forecast, but indicates that pricing linked to AI has become more sensitive to quarterly results.
Automatically translated from Portuguese.
