Tech sell-off drives US markets down by nearly $1tn after subpar earnings reports

In recent days, significant declines in big tech stocks have led to a substantial sell-off, resulting in a combined loss of nearly $1tn from US markets in just one week, according to wire material. This downturn has impacted major indices, with the Nasdaq composite dropping over 3% and the Nasdaq 100 set to lose more than $2tn in market value this month.

The decline in tech stocks has intensified investor concerns about the rapid return on investment in artificial intelligence (AI) initiatives. Major players such as Meta Platforms, Alphabet, and Amazon have raised their spending forecasts, reflecting their urgency to expand AI infrastructure. Intel, for instance, experienced a sharp decline of nearly 30% and is near its worst single-day performance since 1974, despite reporting a higher-than-expected profit for the latest quarter.

Amazon also faced a weaker profit report for the summer and disclosed spending more than anticipated, leading to a 1.8% drop in its stock price. Alphabet’s shares plummeted over 12% on the previous day, causing a $500bn reduction in its market capitalization and marking its lowest trading day ever as it revealed increased cash burn due to massive AI investments.

The recent negative performance, especially for chip companies like Nvidia, which has lost 3.1% of its value, highlights growing doubts about the profitability of AI investments. Nvidia's drop has been a significant driver in the S&P 500's downward trend, overshadowing other mixed movements in the market. Despite some mixed performances, the overall sentiment among investors remains cautious due to high inflation and rising fuel prices, which continue to weigh on broader economic expectations.