US Tech Stocks See Sharp Falls As AI Spending Nears $1 Trillion

U.S. technology stocks suffered their second day of sharp declines on Friday, as investors grew increasingly worried about the staggering cost of artificial intelligence development and whether those investments will yield returns. The Nasdaq plummeted over 3.5%, while Intel shares plummeted as much as 30%, Reddit saw a 26% drop, and Alphabet experienced further losses following a $500 billion market value decrease on Thursday.

According to the BBC, Meta, Alphabet, Oracle, Amazon, and Microsoft have pledged to invest $800.6 billion in AI by 2026.

Chris Low, from investment management firm FHN Financial, noted that the majority of the market's turbulence was driven by major tech giants such as Amazon and Google, who are experiencing significant challenges in their aggressive pursuit of AI expansion. Low told Reuters that these issues indicate the sector may be entering a slowdown period.

Kathleen Brookes, research director at trading firm XTB, highlighted the volatile nature of the AI trade in recent months, with investors becoming increasingly ruthless in their reactions to any signs of disappointment in third-quarter earnings. Brookes elaborated that November is typically a strong month for stocks, and if AI stocks continue to struggle in the coming days, it could signal that the AI trade has peaked, prompting investors to search for a new theme to bolster market performance.