Tech sell-off deepens, sending Wall Street toward its worst day since June
The tech-heavy Nasdaq shed about 3 per cent by mid afternoon. In Canada, the S&P/TSX composite index was down about 2.3 per cent. Worries are rising about whether the hundreds of billions of dollars invested in AI will produce enough profit and productivity to make the investment worth it.
Wall Street faces renewed pressure heading into the week, with tech stocks taking the hit. The culprit is disappointing earnings and outlooks from several tech companies, including Intel, Amazon, Reddit, and Twilio. The massive capital requirements of the AI boom have become a major concern. Amazon reported a free cash flow of minus 42.4 billion US dollars over the past twelve months, Alphabet posted a negative cash flow of minus 9.1 billion in the quarter, Meta was negative for the first time since 2012, and SpaceX burned through around 9.9 billion US dollars.
Amazon also disappointed with weaker guidance. While its cloud subsidiary AWS grew by 39 percent, it fell short of expectations due to high investments, which strained cash flow. Intel met expectations for the third quarter but offered a significantly weaker outlook, predicting only 15 to 16 billion US dollars in revenue for the fourth quarter, hampered by weak PC demand and a production halt in Israel.
Despite this, the core AI boom remains fundamentally intact, with data center spending and demand still high. However, investors are increasingly questioning how long this growth can be sustained if the free cash flow of hyperscalers continues to decline.
Written by urgent.news from Handelsblatt's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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