Tech stocks crushed as Nasdaq tumbles nearly 1,000 points

The Nasdaq Composite Index tumbled more than 830 points, or 3.2%, in midday trading on Friday after disappointing earnings reports from Alphabet, Amazon and Intel renewed fears about the prospects for artificial intelligence. 

Intel’s stock plunged more than 30%, while shares of Google’s parent, Alphabet, continued to wobble after the company’s Class A stock slid more than 12% on Thursday, its worst day since the company went public as Google in 2004. The drop erased roughly $500 billion in Alphabet’s market value.

Amazon fell 2.2% after reporting weaker-than-expected profits, while shares of Reddit and Roblox tumbled 30% and 20%, respectively.

“This has been one of the worst tech earnings seasons in memory, with underwhelming results from a slew of very prominent companies,” market analyst Adam Crisafulli, head of Vital Knowledge, said in a research note. 

The S&P 500 and Dow Jones Industrial Average fell 1.9% and 0.9%, respectively, in afternoon trading.

The weaker-than-expected tech earnings reports are heightening concerns that massive investments in AI will not generate the payoff Wall Street expects. Investors are also worried about the debt companies are taking on to finance data center capital expenditures and whether that debt is sustainable.

“Mega-cap stocks have faced increased selling pressure over the past two weeks as elevated AI-related spending and rising financing costs raise concerns over the path to profitability,” Adam Turnquist, chief cross-asset strategist for brokerage firm LPL Financial, said in an email. “Recent earnings reports have added to these concerns, revealing slowing growth in select hyperscalers’ core businesses.”

Investors have been banking on the explosive growth of AI, which has propelled the stock market to record highs, to continue to dominate. However, that sentiment is now under threat. In a report earlier this week, Ulrike Hoffmann-Burchardi, CIO Americas and global head of equities for UBS’ Chief Investment Office, advised clients to “diversify beyond AI.”

“While we maintain a constructive outlook on the structural growth of the AI theme, high expectations and potentially wide differences in company outcomes underscore the risks of single-stock concentration,” she said. “We think investors should ensure their equity portfolios are broadly diversified.”

Cryptocurrency prices also slumped after hackers believed to be linked to North Korea stole more than $6 billion from Binance, the world’s biggest crypto exchange. The price of bitcoin fell toward $77,000, from more than $86,000 earlier this month.