US Tech Stocks Fall Sharply as Investors Worry Over Massive AI Spending

US technology shares tumbled for the second straight day on Friday as investors grew nervous about the massive amounts of money companies are pouring into artificial intelligence. The tech-heavy Nasdaq index dropped more than 3.5 percent, marking its lowest level in over two months.

Company Losses

Individual firms saw steep drops. Alphabet shares fell after the company lost more than $500bn in value on Thursday, driven by news that its AI summaries were hurting ad revenue while its yearly investments could reach up to $205bn. Intel shares plunged by as much as 30 percent, putting the chip maker on track to lose over $130bn in value. Intel finance chief David Zinsner stated the firm expects a continued slowdown in personal computers through the first half of next year. Amazon shares dropped up to 6 percent in overnight trade after reporting that its spending increased six-fold in three months, with $220bn committed to AI data centres and servers this year alone. Reddit shares fell 26 percent due to weak user numbers and lower referral traffic from Google search, while Roblox dropped nearly 20 percent on falling active users.

Market Reactions

Major firms including Meta, Alphabet, Oracle, Amazon, and Microsoft have committed to spending $800.6bn between them in 2026 alone. Analysts are now warning about a potential AI bubble because earnings are failing to match these huge costs. Chris Low from FHN Financial noted that big tech firms are showing growing pains as they push into AI. Kathleen Brookes from XTB added that investors have turned ruthless and want payback for these heavy investments.

Context

Rapid technological shifts often create heavy financial speculation before producing steady profits. Major industry transitions throughout history have regularly seen investors back away when initial spending outpaces early returns.