Tech stocks bleed as AI costs crush Intel, dragging market to worst day since June

Intel shares fell 30% on Friday, marking the stock's worst single-day drop since 1974 and pulling the broader market toward its worst performance since June.

The S&P 500 index dropped 1.9% by 1:20 p.m. Eastern time, erasing its gains for October despite hitting an all-time high earlier in the month. The Nasdaq composite, which is heavily weighted toward technology firms, slid 3.1%. The Dow Jones Industrial Average lost 511 points, a 1% decline.

The sell-off intensified as investors questioned whether massive spending on artificial intelligence will generate enough profit to justify the costs. Intel CEO Lip-Bu Tan stated that the personal computer industry continues to face pressure. The company issued a profit forecast for the final quarter of the year that missed analyst estimates, even though its reported profit for the latest quarter was stronger than expected.

Other major technology companies also fell. Amazon dropped 2.1% after reporting a weaker summer profit than analysts predicted. The company spent $94.8 billion on property and equipment, primarily for AI technology, and burned through $42.4 billion in cash over the prior 12 months. Nvidia, whose chips are central to AI data centers, fell 4.8%, exerting the heaviest downward force on the S&P 500.

The market reaction comes just days before the U.S. midterm elections on Tuesday. Investors are also watching the impact of high interest rates on the pace of data center construction. Joe Tigay, a portfolio manager at Equity Armor Investments, told investors in a note that the market is moving from the hopes and dreams phase of the AI trade into the show me phase.

In the cryptocurrency sector, stocks tumbled following a hack on Binance, the world's largest crypto exchange. Bitcoin's price fell toward $77,000 from more than $86,000 earlier in the month. A U.S.-based blockchain intelligence firm said a North Korean unit was likely behind the attack, which impacted more than $6 billion worth of crypto assets. Coinbase Global fell 13.4% and Strategy dropped 8.7%, despite both companies reporting stronger quarterly profits than expected.

Outside the tech sector, many stocks rallied after beating earnings expectations. ExxonMobil climbed 2% and Chevron rose 1.7% following better-than-expected summer profits. Mondelez International, the maker of Oreo cookies, rose 3.9% on stronger growth. Colgate-Palmolive gained 3.6% as higher prices helped boost revenue and profit. In the bond market, the yield on the 10-year Treasury fell to 4.94% from 4.98% late Thursday, as investors sought safer assets. Brent crude oil prices rose 3% to $114.11 per barrel, near the high end of their range since the war with Iran began.

Global markets also reflected the tech-led weakness. South Korea's Kospi index dropped 3.5% due to concerns about AI, while Japan's Nikkei 225 fell 2.1% after the Bank of Japan kept interest rates steady. The Hang Seng index in Hong Kong climbed 1.5%.