US Stock Market: Shares of major US technology companies witnessed sharp declines on Friday as investors grew increasingly concerned about the rising costs of artificial intelligence (AI) development and uncertain returns on massive investments. Intel, Reddit and Roblox recorded significant losses, while the technology-heavy Nasdaq opened at its lowest level in more than two months.
The sell-off reflects growing concerns that technology companies may be spending heavily on AI infrastructure without generating sufficient revenue to justify the investments. Disappointing earnings, weaker user growth and concerns about the impact of AI-powered search on traditional advertising and online traffic further unsettled investors.
Intel Shares Plunge 30% After Weak Earnings Outlook
Intel shares came under heavy selling pressure, falling as much as 30% in early Friday trading. The decline followed the chipmaker’s third-quarter earnings update, which warned of a weaker personal computer (PC) market and lower-than-expected revenue for the fourth quarter.
Intel’s finance chief, David Zinsner, said the company did not expect to generate more cash than it spent this year. He also indicated that the slowdown in the PC market could continue through at least the first half of next year.
In its earnings call, the company said it had significantly increased spending on equipment during the third quarter and expected investment to rise further in the final three months of the year.
The outlook raised concerns among investors about Intel’s ability to balance its growing AI-related expenditure with its financial performance.
Amazon and Alphabet Shares Also Under Pressure
Amazon shares dropped as much as 6% before recovering some losses after its earnings report on Thursday fell short of market expectations.
Alphabet, the parent company of Google, also remained under pressure. Its market value had fallen by more than $500 billion on Thursday after the company disclosed that AI-generated summaries were affecting revenue from its core search advertising business.
Alphabet shares declined by another 1% in early Friday trading, extending the losses.
The developments have raised questions about how AI-powered search features could reshape Google’s traditional advertising model and affect the company’s long-term revenue streams.
Reddit and Roblox Stocks Record Major Losses
Other technology companies also faced significant selling pressure.
Reddit shares fell around 26% after the social media platform reported weaker-than-expected daily user figures. The company also warned that Google’s expanding AI-driven search features were affecting referral traffic to its platform.
Shares of online gaming company Roblox dropped nearly 20% after it reported a decline in daily active users.
The declines highlighted investor concerns that technology companies are facing challenges not only from rising operational and infrastructure costs but also from changing user behaviour and competition driven by artificial intelligence.
AI Investment Returns Become a Major Concern
Several major technology companies, including Microsoft, Amazon and Alphabet, have reported earnings this week. Their results have intensified debate over whether the enormous investments being made in AI infrastructure will deliver sustainable financial returns.
Technology companies are spending heavily on data centres, advanced chips, computing capacity and other infrastructure required to develop and operate AI systems.
However, investors are increasingly looking for clear evidence that these investments will translate into stronger revenues and profits.
Chris Low of investment management firm FHN Financial told Reuters that much of the stock market movement was being driven by reactions to major technology companies such as Amazon and Google.
He said the companies were “showing some pretty significant growing pains as they aggressively pursue the AI build-out”.
Low added that investors were interpreting these developments as possible signs that the broader technology sector could slow down.
What Does the AI Sell-Off Mean for the US Stock Market?
The latest decline signals a shift in investor sentiment towards the technology sector. While artificial intelligence remains a major growth opportunity, investors are becoming more cautious about the cost of developing AI systems and the time required to generate meaningful returns.
The performance of major technology companies in the coming quarters will be closely watched as markets assess whether their AI investments can support long-term growth.
For now, rising expenditure, weaker earnings outlooks and uncertainty over AI-driven business models are putting pressure on US technology stocks.
The latest market correction also highlights a growing distinction between the long-term potential of artificial intelligence and the immediate financial expectations of investors.