Wall Street's AI party hits a brutal reality check

Wall Street's artificial-intelligence (AI) party met a harsh reality check on Friday after tech stocks suffered a significant sell-off. The S&P 500 fell 1.8%, the Nasdaq composite dropped 2.9%, and the Dow Jones Industrial Average declined 1.1%. Intel's stock plummeted 28.6%, marking its worst decline since 1974, as it failed to meet profit expectations.

Amazon also saw a 1.4% drop due to weak summer earnings and massive cash burn in AI investments. Alphabet's stock plunged more than 12%, its worst day ever, after reporting a surge in cash burn for AI initiatives. Nvidia, a key player in the AI frenzy, saw its stock drop 4.2%, dragging the S&P 500 lower. The cryptocurrency market also suffered after a hack on the largest crypto exchange, with Bitcoin's price falling below $77,000.

However, some traditional sectors like oil and consumer goods remained resilient, with ExxonMobil and Colgate-Palmolive reporting stronger-than-expected profits. The stock market remains only 3.1% below its all-time high, but investor confidence is waning as midterm elections approach and concerns about high interest rates slow data center expansion grow.