Microsoft, Alphabet, Amazon, Meta, and Oracle returned just 9.3% of cash to shareholders in the first three quarters of 2026, a 15-year low amid AI spending (Patturaja Murugaboopathy/Reuters)

European stocks slid on Friday amid concerns over tech earnings, which have fueled fears of excessive spending on artificial intelligence. Despite the pan-European STOXX 600 index still on track for its best monthly performance since June, the index fell 0.25%, extending a global tech decline that began with Alphabet. The technology sector across Europe also suffered, with Germany's DAX down 0.4% and France's CAC 40 slipping 0.1%.

London's FTSE 100 saw a modest gain of 0.3%. Amazon disclosed a negative $42.4 billion in free cash flow over the past year and a capital expenditure of $77.3 billion, double the previous year. Intel warned that its fourth-quarter revenue would fall short of analyst expectations, citing a slowdown in the PC market. European tech firms, including ASML, ASM International, BE Semiconductor, and Infineon, followed suit, with each stock declining over 4%.

These earnings reports underscore the strain the infrastructure race is putting on the tech industry and its impact on consumers. Companies have increasingly relied on debt to finance data centers, while price hikes have dampened demand for devices like PCs and smartphones. The situation has caught the attention of policymakers; ECB President Christine Lagarde noted on Thursday that long-dated borrowing costs are rising globally, partly due to hyperscalers issuing more long-term bonds.

There are also signs of caution from financial institutions like Barclays, which is seeking default protection on over $10 billion of AI infrastructure debt. Despite the turmoil, Europe's STOXX 600 remains resilient, having gained about 2.2% over the past month, buoyed by the region's stronger representation in energy, defense, and banking sectors compared to the technology sector.

The index's low point of 625.5 on October 8 was triggered by a global tech selloff fueled by worries about debt-funded AI spending. This selloff coincided with rising U.S. 10-year yields nearing 5.36% the day before. In France, tensions boiled over into riots, driving up French yields above 5%. Meanwhile, oil prices hit a five-month high, marking their steepest weekly decline since early September.

Earnings have been the primary driver of the market's response, with third-quarter reporting producing a mixed bag. While Kering experienced sharp declines, LSEG data indicate that STOXX 600 earnings are expected to rise by 23.6% in the quarter, the second-best performance since 2022. Energy sector profits are expected to soar by 139%, although excluding energy, growth is projected at 9.8%.

However, macroeconomic risks persist. The ECB maintained its deposit rate at 2.50% during its latest meeting, signaling a hawkish pause. Markets are pricing a roughly two-in-three chance of a December rate hike, and Lagarde announced her intention to resign in February 2027, nine months before her term is set to end.