Financeupdated 1h ago2 min read
Archive photo · 26 September 2018Wall Street Slides as Tech Stocks Sink on Renewed AI Profitability Worries
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Tech stocks slide after Intel and Amazon results, renewing AI profitability concerns. Nasdaq-led declines amid AI worries, with tech slump weighing market broadly.
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AI doubts hit Wall Street
Wall Street slid on Friday as tech stocks sank on renewed worries about whether artificial intelligence spending will deliver enough profit and productivity to justify the outlays. The S&P 500 tumbled 1.8% for its worst day since June and closed out a third straight losing week, while the Nasdaq composite fell 2.9%. The Dow Jones Industrial Average dropped 572 points, or 1.1%, and the US stock market remained only 3.1% below its all-time high.
Investors also focused on whether AI-linked tech companies were sending prices too high, with the sell-off deepening after results from Amazon and Intel. The market’s weakness for technology stocks pulled down the Nasdaq composite and left the broader index pressure tied to the AI boom’s profitability question.
Earnings, spending, and debt
Amazon finished down 1.41% after reporting third-quarter revenue and profit that came in below expectations, and the company’s AI boost to remote computing lifted sales by 39% but left the bill exceeding revenues. Alphabet had to draw $9 billion from its cash to finance AI development, and investors questioned whether large capital expenditures to expand AI would be profitable. Intel slid 28.58% after forecasting fourth-quarter revenue of $15 to $16 billion well below expectations, and the Philadelphia semiconductor index sank 7.2% on Friday.
Andy Jassy told shareholders Thursday to brace for even more spending, saying, "We still expect 2026 cash [capital expenditures] of approximately $220 billion, the majority for AWS, and expect to spend meaningfully more in 2027,". The sell-off also pushed the Nasdaq Composite down 2.8%, with the day’s losses tied to Thursday’s earnings reports that failed to reassure investors and analysts.
Global markets and oil
Global stock markets reflected the same AI skepticism, with Paris closing virtually flat at -0.01% and London up 0.07%, while Frankfurt fell -0.85%, Milan fell -1.00%, and Madrid fell -1.09%. For the month, Paris finished essentially stable at +0.06%, while Milan declined -3.64% and Madrid fell -3.98%, as investors rotated into sectors viewed as safer. Oil prices rose on Friday, with Brent up 2.40% to $117.64 per barrel and West Texas Intermediate up 2.08% to $104.12.
Iran said Thursday that four tankers caught fire after striking mines, and the sources tied the oil support to tensions in the Gulf and fears of a renewed U.S. strike against Tehran after Tuesday’s midterm elections. Bitcoin also moved lower, falling 2.55% to $76,783 around 20:55 GMT, after Binance suffered a hacking on Thursday with damage estimated at $6.3 billion.