Tech Stocks Fall for Second Day as AI Spending Concerns Deepen

Technology stocks fell sharply for the second day in a row on Friday as concerns mounted over the enormous sums firms are investing in artificial intelligence. Intel shares plummeted by 28%, wiping more than $130bn off the chipmaker's value, while Google owner Alphabet fell a further 1.4% after a 12% plunge on Thursday. Other technology companies, including Reddit and Amazon, also declined, and the Nasdaq index ended October with its worst monthly slide since March 2025. The sell-off reflects growing anxiety that the massive spending commitments of major technology firms are not yet being matched by earnings. Meta, Alphabet, Oracle, Amazon and Microsoft have together committed to spending $800bn in 2026, with much of that directed towards AI infrastructure. Alphabet's stock market value fell by more than $500bn (£374bn) on Thursday after the company revealed that the AI summaries it now displays as the top answer to search queries were affecting its core search advertising revenue. Alphabet also expects to spend up to $205bn this year on investments, almost entirely related to AI. Intel's losses were even larger on Friday. The company said it planned to increase AI spending despite weaker demand for computers, a major source of demand for its microprocessors. On Thursday, Intel finance chief David Zinsner said the firm did not expect to bring in more cash than it spent this year and forecast lower-than-expected fourth-quarter revenue. "Looking ahead, we see the PC slowdown continuing at least through the first half of next year," he said in the chipmaker's third-quarter earnings report, adding that investment in equipment had ramped up significantly and would become "even more significant" in the following three months. Amazon also revealed on Thursday that it had spent more cash than it was making, with spending increasing six-fold over three months. The company has committed to spending $220bn this year on investments including AI data centres, network equipment and servers. Its shares recovered some overnight losses but still closed down 1.4%. Reddit stock plunged 29% after the social media platform reported weaker-than-expected daily user figures and warned that Google's growing AI-driven search was hurting referral traffic. Roblox fell 18% after its daily active user numbers dropped. Analysts said the week's earnings reports, including from Microsoft, had raised questions about the payout from huge AI investments. Chris Low of investment management firm FHN Financial told Reuters that the bulk of the market reaction stemmed from the biggest players such as Amazon and Google, which were "showing some pretty significant growing pains as they aggressively pursue the AI build-out". "The thinking is that these signs suggest that the entire sector is going to slow down," he said. Kathleen Brookes, research director at trading firm XTB, said investors had turned ruthless in punishing any signs of disappointment in third-quarter earnings. "The AI trade has had a good run in recent years, but now investors want payback, and companies like Alphabet and Intel are in the crosshairs," she said. She noted that November is typically a strong month for stocks, but warned that continued struggles in AI shares could suggest the AI trade is past its peak, prompting investors to seek a new theme to drive markets. Despite the recent falls, stock market values for many of these companies remain well above where they stood a year ago. While the Nasdaq closed 2.8% lower on Friday, it is up 7.8% over the last year. Amazon is up nearly 8% over the past 12 months, while Alphabet is down 1.3%. Many analysts continue to debate whether an AI bubble is forming, with the central worry being that some firms will not be able to justify their valuations if the cost of building AI data centres and developing software ultimately exceeds the revenue it generates.