US technology stocks experienced a significant downturn, with the Nasdaq losing nearly $1 trillion in market value over the past week amid rising concerns over artificial intelligence (AI) investment returns. This decline was driven by disappointing earnings reports and apprehensions regarding the profitability of extensive AI infrastructure spending by major tech companies.
The Nasdaq Composite dropped over 3% on Friday, while the S&P 500 fell more than 1%, threatening to negate its gains for October. The Dow Jones Industrial Average also faced declines, though the impact was less severe compared to other indices. The Nasdaq 100 has seen a decline of more than 5.8% so far in October, as investors question whether tech giants can justify their hefty AI investments with adequate profits.
Intel’s shares plummeted nearly 30% following a profit forecast for the final quarter that fell short of expectations, despite the company reporting stronger-than-anticipated quarterly earnings. Similarly, Amazon’s shares saw a 1.8% decline after the company revealed lower-than-expected summer profits and higher-than-anticipated spending. Alphabet experienced a more drastic drop, with its shares falling more than 12% after disclosing elevated cash spending on AI, resulting in a loss of approximately $500 billion in market value.
Major tech companies, including Meta, Alphabet, and Amazon, have been increasing their forecasts for AI infrastructure and data center investments. However, investor confidence is waning as questions arise about the potential profitability and productivity gains from these ventures. Nvidia, another key player in the tech sector, saw its shares fall 3.1%, further pressuring the S&P 500 index and highlighting broader concerns about the impact of high interest rates on data center expansion and AI-related demand.
The market’s recent performance underscores growing uncertainty about the financial returns on AI investments, even as there are strong expectations for corporate earnings growth across the US economy. This situation reflects a broader apprehension among investors about the sustainability and profitability of AI-driven strategies in the tech industry.