Technology stocks experienced significant declines for the second consecutive day, driven by rising apprehensions regarding the massive investments in artificial intelligence (AI) by various companies. Notably, Intel’s shares dropped by 28% on Friday, while Alphabet, the parent company of Google, saw its stock decrease an additional 1.4% following a substantial 12% fall on Thursday.
Other tech giants, including Reddit and Amazon, also reported stock decreases, with the Nasdaq index, which tracks the largest tech firms in the US, concluding October with its steepest monthly decline since March 2025. Despite the heavy financial commitment to AI, many tech firms are struggling to meet analysts’ revenue expectations, raising fears of a potential AI bubble.
Major players in the tech industry, such as Meta, Alphabet, Oracle, Amazon, and Microsoft, have announced plans to invest a combined total of $800 billion in AI by 2026. Alphabet’s market capitalization suffered a significant blow on Thursday, losing over $500 billion after the company disclosed that its new AI-generated summaries were negatively impacting its core search advertising revenue. In anticipation of future growth, Alphabet also expects to allocate up to $205 billion this year on AI-related investments.
The most severe losses on Friday were seen with Intel, which lost more than $130 billion in value. The chip manufacturer stated its intention to increase AI-related spending despite a downturn in computer demand, a primary driver for its microprocessor business. Intel’s finance chief, David Zinsner, acknowledged during the company’s earnings call that they do not expect to generate more revenue than their spending this year, projecting lower-than-expected revenue for the fourth quarter. He indicated that the slowdown in PC sales is likely to persist at least through the first half of next year.
On Thursday, Amazon disclosed that its expenditures had exceeded earnings, with spending rising six-fold over three months. The company is on track to invest $220 billion this year in areas such as AI data centers, networking equipment, and servers. Although Amazon shares partially recovered some losses, they still ended Friday down by 1.4%.
Reddit’s stock fell dramatically by 29% after the platform announced disappointing daily user statistics and cautioned that Google’s expanding AI-driven search capabilities were adversely affecting referral traffic. Additionally, shares in the online gaming platform Roblox fell 18% due to a decline in daily active users.
This week has seen several major tech firms, including Microsoft, report their earnings, prompting analysts to question the returns on their substantial AI investments. Chris Low from FHN Financial noted that the recent stock market fluctuations are largely reactions to the performance of prominent tech players like Amazon and Google, which are facing significant challenges as they aggressively expand their AI initiatives. He suggested that these developments may indicate a broader slowdown across the sector.
Amid ongoing discussions about the potential for an AI bubble in the stock market, concerns arise that some tech companies may struggle to justify their high valuations. The costs associated with building AI data centers and developing software could surpass the revenues generated, leading to potential financial instability.
Kathleen Brookes, research director at trading firm XTB, pointed out the volatility in AI trading over recent months, stating, “Investors have turned ruthless, punishing any signs of disappointment in third-quarter earnings. The AI trade has enjoyed a robust period, but now investors are looking for returns, placing companies like Alphabet and Intel under scrutiny.” Nevertheless, the stock market values of many of these firms remain significantly higher than they were a year ago, with the Nasdaq index closing 2.8% lower but up 7.8% over the past year. Similarly, Amazon has risen nearly 8% in the last 12 months, while Alphabet is down 1.3%.
Brookes also noted that November typically sees strong stock performance. If AI stocks continue to struggle in the coming days, it may indicate that the AI trade has peaked, prompting investors to seek new themes to drive market growth.
