US tech stocks drop sharply as AI spending nears $1tn
Tech stocks tumbled for a second straight day.
The short version
- Wall Street is asking when the AI spending will pay off.
- Alphabet lost over $500bn after AI search hurt ad sales.
- Intel shares plummeted 30 percent while planning more AI investments.
- Amazon and Reddit also fell as investors turned ruthless on earnings.
Wall Street just hit a wall of reality as tech stocks tumbled for the second day in a row. Shares in Intel, the giant computer chip maker, plummeted by as much as 30 percent on Friday. The massive sell-off follows Google owner Alphabet's stock price plunging by more than $500bn in the previous day's trading.
Other big tech names including Amazon and Reddit also fell, while the Nasdaq index of the largest tech firms listed in the US sank over 3.5 percent, according to the BBC. Meta, Alphabet, Oracle, Amazon, and Microsoft have committed to spending $800.6bn between them in 2026 alone.
Alphabet's stock market value plunged on Thursday after it revealed its own AI summaries were affecting its core search advertising revenue. At the same time, Alphabet expects to spend up to $205bn this year on investments, almost entirely related to artificial intelligence.
Amazon revealed it had spent more cash than it was making, with spending increasing six-fold over three months as it puts money into AI data centres and servers. Reddit stock dropped 26 percent after the social media platform warned that Google's growing AI search was hurting referral traffic.
Kathleen Brookes, research director at trading firm XTB, said investors have turned ruthless and are punishing any signs of disappointment in earnings. If your retirement account or business portfolio is heavy in tech, this week's red numbers are a sharp reminder that sky-high valuations require actual cash in hand.
Photo: Austin McKinley, CC BY 3.0, via Wikimedia Commons
