Tech Sell-off: Intel Plunges 30% as AI Costs Worry Investors

Intel shares fell 30% on Friday, marking the company's steepest decline since 1974. The drop dragged the Nasdaq composite down 3.1% and pushed the S&P 500 lower by 1.9%. The index is on track to erase all gains recorded in October, despite hitting an all-time high earlier in the month. As of 1:20 p.m. Eastern time, the Dow Jones Industrial Average had lost 511 points, or 1%.

The sell-off stems from concerns that artificial intelligence valuations have risen too high. Intel CEO Lip-Bu Tan told investors that the personal computer industry continues to face pressure. Although Intel reported quarterly profits that beat analyst expectations, its forecast for the final quarter of the year fell short of estimates. This news arrived just days before Tuesday's midterm elections, a period when stock performance often influences public perception of President Donald Trump's economic record.

Amazon shares sank 2.1% after the company reported weaker summer profits than expected. More troubling for investors was the report that Amazon consumed $42.4 billion in cash over the past 12 months. The company spent $94.8 billion on property and equipment, primarily for AI technology. A day earlier, Alphabet stock dropped more than 12%, its worst single-day performance on record, after revealing that cash burn increased from spring to summer due to similar massive AI investments.

Nvidia, the central figure in the AI hardware boom, saw its stock drop 4.8%. This decline exerted more downward pressure on the S&P 500 than Intel's loss. Joe Tigay, a portfolio manager at Equity Armor Investments, noted in a client memo that the market is shifting from the hopes and dreams phase of the AI trade into a show me phase. Investors are questioning whether hundreds of billions in spending will generate sufficient returns, while high interest rates threaten to slow data center construction.

In the cryptocurrency sector, stocks tumbled following a hack at Binance, the world's largest exchange. Bitcoin prices fell toward $77,000 from above $86,000 earlier in the month. A U.S.-based blockchain intelligence firm reported that a North Korean unit was likely responsible for the attack, which impacted more than $6 billion in crypto assets. Coinbase Global fell 13.4% despite beating quarterly profit estimates. Strategy, which holds about 4% of total bitcoin supply, dropped 8.7% after announcing its CFO would resign for personal reasons.

Non-tech sectors showed resilience. ExxonMobil rose 2% and Chevron added 1.7% after both oil giants reported stronger summer profits than expected. Mondelez International, maker of Oreo cookies, climbed 3.9% on better-than-expected growth. Colgate-Palmolive gained 3.6% as higher global prices for its products boosted revenue. These gains helped keep the number of rising stocks in the S&P 500 nearly equal to the number of falling stocks.

In the bond market, Treasury yields eased as investors sought safer assets. The 10-year Treasury yield fell to 4.94%, down from 4.98% late Thursday and more than 5.30% earlier in the month. This decline occurred even as Brent crude oil prices rose 3% to $114.11 per barrel. Global markets reacted with mixed results; South Korea's Kospi dropped 3.5% on tech worries, while Japan's Nikkei 225 fell 2.1% after the Bank of Japan kept interest rates steady.