Tech firms take fresh hit as disappointing earnings fan AI fears

AI-focused technology companies faced substantial declines after Amazon's quarterly report fell short of analyst expectations for profit and revenue. Intel's earnings forecast also missed estimates due to weak demand for PC processors and supply chain issues. These announcements followed Google's parent company, Alphabet, reporting weaker revenue growth from its advertising and search businesses, followed by a pledge to increase capital expenditure.

Alphabet's shares plummeted over 12%, while Amazon's plummeted more than 7%, having shed more than 4% before the close. Intel's stock dropped by 23%. The Nasdaq suffered a decline of more than 1%. The market downturn continued in Asia, with South Korean chipmaker SK hynix and rival Samsung experiencing sharp declines of over 7% and 3%, respectively.

Japanese semiconductor firm Kioxia shed more than 7%, while Advantest and SoftBank fell nearly 6%. Taiwan's TSMC lost 1.9%. This earnings season has been challenging for AI players, with most experiencing losses amid concerns about an AI bubble and inflation. Analyst Anna Wu from Floodlines Research noted that the issue lies not with a slowdown in AI demand, but with higher funding costs and credit risk potentially forcing hyperscalers to scale back their expansion plans.

The sell-off affected broader markets in the region, with Seoul falling over 3%, Tokyo and Taipei shedding more than 2%, and Hong Kong, Sydney, Mumbai, and Wellington rising. Stock markets in Paris were flat as French economic data indicated a contraction in the third quarter, adding to concerns about public finances and growing political tensions.

In contrast to the earlier optimism, earlier in the week, SK hynix reported a 632% increase in operating profit and AI giant Anthropic revealed a first-half revenue surge of about 1,300% in its IPO filing. Fears over the significant investments firms are making in AI and the uncertain timeline for profitability, combined with rising borrowing costs, have intensified investor apprehensions about company finances.

The focus is now shifting to Tuesday's US midterm elections and their potential impact on the final two years of Donald Trump's presidency. Some speculate that Trump may intensify his conflict with Iran, which could cause oil prices to rise again. Despite these concerns, many analysts believe the upcoming US midterm elections are less likely to significantly impact the markets.

Instead, the primary risk for markets remains a potential surge in crude oil prices surpassing $120 a barrel. Bitcoin experienced a steep decline, dropping around 5% to a one-month low of approximately $76,400 following a major hack that affected over $6 billion in funds. The world's largest cryptocurrency exchange by daily trading volumes, Binance, initially claimed user funds were secure but later revealed that it would cover all losses.

The exchange said that around $3 billion was frozen on-chain. This hack represents four times the amount impacted in the largest-ever cyberattack of its kind, which resulted in $1.5 billion being stolen from the Bybit platform in February 2025. Currency markets saw the yen strengthen against the dollar after the Bank of Japan maintained interest rates and affirmed that inflation had exceeded its 2% target.