AI Spending Fears Trigger Wall Street Crash; Nasdaq Plummets
US stocks plunge as Intel and Amazon results spark fears over AI spending returns. Nasdaq records its steepest drop since June.
Wall Street experienced a dramatic downturn on Friday, as a wave of anxiety regarding Wall Street AI selloff and the actual returns on massive technology investments sent indices sliding. The Nasdaq Composite bore the brunt of the carnage, recording its sharpest one-day percentage decline since June 5, signaling a growing skepticism among investors about the pace of AI profitability.
The Numbers: A Bleak Friday for US Indices
The market volatility was evident across all major benchmarks, with tech-heavy indices leading the descent:
- Nasdaq Composite: Plunged 2.86 per cent to close at 25,437.00.
- S&P 500: Dropped 1.82 per cent, ending at 7,580.07.
- Dow Jones Industrial Average: Fell 1.09 per cent to finish at 51,770.31.
The Nasdaq's decline is particularly striking, as it has now shed 7.8 per cent of its value from the record closing high it achieved on October 6.
The Catalyst: Intel and Amazon Spark Panic
The selloff was ignited by quarterly results from Intel and Amazon, released late Thursday. The reports intensified fears that the astronomical sums being poured into artificial intelligence by tech giants may not yield returns quickly enough to justify the expenditure.
Chipmakers and Hardware Hit Hard
The semiconductor industry faced a brutal session. Intel shares crashed by a staggering 28.6 per cent. Other key players in the AI chip race were not spared:
- AMD: Dropped 10.9 per cent.
- Nvidia: Fell 4.2 per cent.
The broader semiconductor index tumbled 7.2 per cent on Friday, pushing its total monthly losses beyond 15 per cent. The ripple effect extended to server manufacturers, with Dell and HP sliding 10.8 per cent and 9.6 per cent, respectively.
Expert Insight: The ROI Question
The current market sentiment reflects a shift from excitement to scrutiny. Oliver Pursche, senior vice president at Wealthspire Advisors in New York, noted that the focus has shifted entirely toward the future of AI and the timeline for a positive return on investment (ROI).
"It's fair to say that this week, not just today, has been very much about the future of AI and what that's going to look like, whether there will be a positive return on investment and if so, how quickly," Pursche told Reuters.
He further highlighted a growing divide in the market: companies that meet the sky-high expectations of investors are thriving, while those that fall even slightly short are being severely punished.
Sectoral Damage and Crypto Chaos
The carnage extended beyond just chipmakers. The technology sector of the S&P 500 saw its biggest monthly percentage drop since March 2025, while the communication services sector suffered its worst monthly fall since April 2022.
Adding to the turmoil, cryptocurrency-linked stocks plummeted following reports of a massive security breach at Binance, where hackers allegedly stole USD 6.3 billion. Consequently, stocks like Coinbase, Strategy, and Robinhood saw declines ranging between 7.2 per cent and 10.6 per cent.
A Silver Lining in Earnings
Despite the dramatic selloff in tech, the broader corporate earnings season has remained surprisingly resilient. According to LSEG data, 82 per cent of the 299 S&P 500 companies that reported third-quarter results managed to beat consensus estimates. Analysts had projected a year-on-year earnings growth of 31.6 per cent for the quarter.
Nevertheless, the week ended on a sour note for investors, with all three major US indices closing lower for the week, and both the S&P 500 and Nasdaq recording losses for the month.