US tech stocks see sharp falls over AI cost fears

US technology stocks are experiencing significant declines due to rising concerns over the escalating expenses associated with artificial intelligence development. Intel's shares plunged as much as 30% on Friday morning, following the chipmaker's warning of a weaker computer market, even as it intends to escalate its AI investments.

Amazon shares dropped by 6% before rebounding after earnings reports that fell short of investor expectations. The tech-focused Nasdaq exchange opened at its lowest level in over two months, down by 2.5%, as other tech companies like Reddit and Roblox continued to decline. This follows Alphabet's stock plummeting by over $500 billion on Thursday, after the company acknowledged that its AI-generated summaries were negatively impacting its primary search advertising income.

Alphabet's stock continued to slide in early trading, down by 1% following the previous day's substantial drop. The more pronounced losses occurred elsewhere, with Intel potentially losing more than $130 billion in value following a disappointing earnings report that left investors dismayed. Intel's CFO, David Zinsner, had previously informed the market that the company did not anticipate generating more revenue than its expenses this year and had projected a lower-than-anticipated revenue for the fourth quarter.

Intel's third-quarter earnings report indicated that the PC market slowdown would persist at least through the first half of the next year. During the earnings call, Zinsner stated that the firm had significantly increased its equipment investments in the third quarter and expected even greater increases in the subsequent three months.

Reddit's stock plummeted by 26% after the social media platform disclosed weaker-than-expected daily user figures and warned that Google's growing AI-driven search was diminishing referral traffic. Roblox's stock also fell by nearly 20%, as its daily active user numbers decreased. Several major tech firms have reported earnings this week, sparking questions about the returns on their substantial AI investments.

Chris Low, from investment firm FHN Financial, explained that the majority of the current market volatility is a reaction to the significant struggles faced by prominent tech players such as Amazon and Google in managing the transition to AI. Low told Reuters that these indications suggest the entire sector is set to decelerate.