Stocks fall on AI cash burn worries while bonds rally with oil

Tech shares on Wall Street experienced a significant decline on Friday, leading to the MSCI's global index dropping over 1 percent. Investors sought refuge in US bonds due to concerns over the high cash-burn in AI investments, which may not yield sufficient returns. Intel's shares plummeted by 28 percent, while Amazon shares fell by 1.9 percent following their reports of heavy cash burn in AI-related development.

Intel also reported a slowdown in PC demand and potential continued weakness in the following year. Alphabet's shares, which had fallen 12.6 percent the previous day, continued their losses on Friday, with the company's substantial AI spending turning its cash flow negative, while its search business faced intense competition. Gene Goldman, the chief investment officer at Cetera, attributed the market's gloom to the heavy cash burn and elevated capital expenditures in AI.

Rising oil prices due to Middle East attacks and concerns about a Binance hack further contributed to the market's downturn. Bitcoin and other cryptocurrencies experienced a decline in value. Outside of the tech sector, energy stocks remained resilient, with Exxon Mobil and Chevron posting strong profits due to high refining margins stemming from supply disruptions caused by Ukrainian attacks on Russian refineries and the US-Israel conflict in Iran.

By 12:09 p.m. ET (1609 GMT), the Dow Jones Industrial Average fell 384.61 points (0.73 percent) to 51,957.95, the S&P 500 declined by 124.20 points (1.61 percent) to 7,595.93, and the Nasdaq Composite dropped 684.06 points (2.61 percent) to 25,500.67. MSCI's global stock gauge fell 15.62 points (1.4 percent) to 1,117.00. The euro weakened by 0.07 percent to $1.117, and the dollar index dropped 0.03 percent to 101.85, with the Japanese yen gaining for a third consecutive day. Gold prices hit a one-year low, and silver dipped below $50 an ounce.