Amazon burns cash, Intel flags weak PC demand as AI boom’s costs ripple across markets

Market uncertainty has grown over the escalating costs of the AI boom, following results from Amazon and Intel that indicated the infrastructure race is impacting both the industry and consumers. Amazon's holiday quarter sales fell short of Wall Street expectations, potentially reflecting pressure on consumers amid rising inflation.

Intel's PC business also faced headwinds as a memory chip shortage drove up its costs. Other tech giants, such as Alphabet and Meta, also burned cash in the September quarter, while Microsoft made up for the shortfall by issuing $25 billion in debt. The tech giants, despite having substantial resources, have drawn investor scrutiny due to the heavy borrowing among smaller AI cloud firms to meet large order backlogs.

Amazon's stock slid 7% in after-hours trading, while AI cloud stocks CoreWeave, Nebius, and Iren dropped 5.8% to 6.7%. Alphabet's stock fell nearly 13% in after-hours trading, and PC makers HP and Dell saw their shares drop 8% and 6.8%, respectively. The semiconductor index also declined post-close due to Intel's warning of near-term challenges in the PC industry.

Intel's shares dropped 18% following a factory explosion in Israel that caused a two-week shutdown and would cost the company around $600 million in lost revenue over two quarters. Analysts noted that Intel's struggles in the PC sector might not necessarily signal larger problems for other chipmakers, which are more prominent in AI.

However, the overall semiconductor weakness was primarily attributed to Intel's earnings report and negative sentiment spillover. Some analysts also expressed concerns about the momentum of trades related to the AI infrastructure boom, noting that tightening financing terms have put highly leveraged firms under pressure.