Tech stocks wipe out $1 trillion in value as concerns deepen about the AI boom

Tech stocks plunged Friday, putting the Nasdaq 100 index on course to erase more than $1.5 trillion in value. The index fell 4.2% in afternoon trading, which would represent its worst one-day drop since mid-June.

The broader S&P 500 also dropped sharply, by more than 2.3%. The S&P’s tech sector was by far the worst performing of the day, tumbling by more than 5%.

As trillion-dollar tech companies raise and spend hundreds of billions of dollars to build massive artificial intelligence data centers and develop AI models, investors are on edge as they look for clear signs that all this spending is actually delivering returns.

These questions underpinned one of the day’s worst performing stocks, Intel, which plunged 31%.

Several of Intel’s large peers followed it lower. SanDisk plunged 15%, chipmakers AMD, ARM Holdings, Qualcomm and Marvell all fell 12%, and ASML dropped 7%.

The seeds of Friday’s massive losses were sown Thursday, however, when Amazon and Intel reported quarterly earnings that failed to reassure investors and analysts.

Shares of Amazon declined by as much as 10% in post-market trading Thursday, before recovering throughout the day Friday.

The Philadelphia semiconductor index, of which Intel is a member, sank 9% on Friday. The “DRAM” ETF, which tracks companies linked to computer memory and storage, tumbled 7.2%.

So-called “neocloud” stocks also sold-off. These upstart firms aim to build data centers for software firms to utilize. Nebius and CoreWeave dropped 11%.

The broader Nasdaq Composite, which tracks the more than 3,000 companies that trade on the exchange, fell 3.4%

Amazon’s spending spree

On Thursday, Amazon reported that its spending to build out AI had continued at a faster clip than expected last quarter, while growth in its core online shopping business had slowed.

The last time Amazon told investors it was upping its AI spending budget, the market rewarded the decision by sending shares up more than 15%.

But a lot has changed in the past three months. Some of the big companies that pay to use AI models have tightened their token budgets. Others have raised questions about exactly how much benefit they’re getting from all the time and resources they’re putting into AI adoption.

In response, some investors are now looking at Big Tech’s massive AI spending through a more skeptical lens.

Nonetheless, Amazon CEO Andy Jassy told shareholders Thursday to brace for even more spending.

“We still expect 2026 cash [capital expenditures] of approximately $220 billion, the majority for AWS, and expect to spend meaningfully more in 2027,” he said on the company’s earnings call. Amazon’s spending had already been set to double from 2025.

Friday’s losses follow significant selling in shares of Alphabet on Thursday.

The Google parent company shed about $500 billion in market value — its worst day ever and the second-worst wipeout of value in market history. On Friday, the stock dropped another 2%.

Intel’s supply chain woes

Intel, meanwhile, told investors that its profits and sales in the fourth quarter would be lower than expected, which sent the stock tanking.

Intel’s stock has surged in recent months as its management implements a sweeping overhaul of the long-ailing chip firm.

In the midst of that turnaround, the U.S. government took a stake in the company, making the federal government the company’s largest shareholder.

Even accounting for Friday’s expected drop, the value of the government’s stake in Intel has grown by 280%.

Computex Taipei Puts AI And Chipmakers On Centre Stage — Intel CEO Lip-Bu Tan in Taipei, Taiwan, in June. Tan cited supply chain issues in the company’s lackluster performance.Cheng Chia Huang / Getty

Analysts at Citigroup described the report as “two steps forward, one step back.”

A major issue highlighted by Intel CEO Lip-Bu Tan that contributed to the company’s lackluster performance in the quarter was supply chain issues.

“I’m disappointed that we were not able to meet strong customer demand in this quarter,” Tan told investors on the company’s earnings call. “We face near-term challenges, including manufacturing, supply shortage, the unprecedented memory crunch and the resulting softness in PC demand.”

Meanwhile, the sell-off in tech shares appeared to increase demand for U.S. Treasuries, which briefly sent yields on government bonds lower.

The big AI companies that are borrowing hundreds of billions for data center build-outs have tapped the debt markets for funds, which has in turn created more competition for capital.

As those companies increasingly offer better rates of return for lenders than the U.S. government does on bonds, Treasury yields have risen in recent months — partly to keep up with the private market.

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