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

Recent disappointing earnings reports from leading tech companies have sparked a significant sell-off in US markets, resulting in a loss of nearly $1tn in market value for the Nasdaq exchange alone. The Nasdaq composite experienced a drop of more than 3%, wiping out hundreds of billions in value. The S&P 500, an index of the 500 most valuable US companies, fell by more than 1%, erasing its October gains and on track to erase the entire month's gains.

The Dow Jones Industrial Average saw a less severe decline. The market turmoil has raised questions about whether the billions invested in AI can generate profitable returns quickly enough. Tech giants Meta Platforms, Alphabet, and Amazon are among the companies raising spending forecasts, as they scramble to expand AI infrastructure.

Intel's stock tumbled nearly 30% amid weaker-than-expected profit forecasts. Amazon also fell 1.8% after reporting a weaker summer profit than expected. Alphabet saw its stock drop more than 12%, erasing $500bn from its market capitalization, marking its worst day on record. Concerns are growing about the effectiveness of the AI investments, as high interest rates may slow down data center expansion.

Nvidia, a key player in the AI frenzy, saw its stock drop by 3.1%, the heaviest force pulling the S&P 500 downward. Despite the losses, the S&P 500 remained mixed, with an even split between gainers and losers. The overall optimism surrounding US companies' profit potential is dampened by global worries about high inflation and fuel prices.