Tech stocks are set to wipe out $1 trillion in value Friday as futures for the Nasdaq Composite Index tumbled nearly 800 points, or 2.7%, following disappointing earnings reports from Amazon, Intel, and Alphabet.
Amazon shares fell 7% in premarket trading after the company reported a third-quarter revenue miss and maintained its 2026 capital expenditure forecast of $220 billion, primarily allocated to AWS. The company also reported negative free cash flow for the second consecutive quarter, exceeding prior expectations. CEO Andy Jassy reiterated plans for meaningfully higher spending in 2027, emphasizing continued investment in AI infrastructure despite investor skepticism.
Intel’s stock plunged 26% ahead of trading after the chipmaker issued weaker-than-expected guidance. The company cited ongoing softness in the PC market and rising memory chip costs as key challenges. Intel now expects adjusted profit per share to be 40% lower than anticipated for the fourth quarter, with CEO Lip-Bu Tan warning that 2027 could be severely impacted by persistent supply chain issues. The company’s market capitalization dropped by $121.7 billion in overnight trading.
Alphabet, Google’s parent company, saw its shares fall nearly 14% on Thursday, contributing to a broader tech sell-off. The decline followed concerns over Gemini’s competitive positioning in AI chatbots and monetization challenges in Google Search. The Nasdaq 100 index is now on track to erase more than $1 trillion in value when markets open Friday.
Market Reactions and Broader Implications
The tech sector’s downturn has raised questions about the sustainability of AI investments, with investors increasingly skeptical about whether massive capital expenditures in AI infrastructure will yield sufficient returns. Futures tracking the S&P 500 also dropped 1.1%, reflecting broader market unease.
Analysts have described the situation as “tech carnage”, with fears of a market crash growing among traders. The FTSE 100 in London, however, remained relatively stable, edging up 0.2% to 10,744, as it has limited exposure to tech and AI stocks. Despite this, British investors with holdings in U.S. tech funds or ISAs face significant losses, as many popular investment vehicles are heavily weighted toward the struggling sector.
Market strategists, including UBS Chief Investment Office’s Ulrike Hoffmann-Burchardi, have advised clients to “diversify beyond AI”, warning that high expectations and potential disparities in company outcomes pose risks for concentrated investments. The current downturn follows a week of underwhelming earnings reports from prominent tech firms, described by analysts as “one of the worst tech earnings seasons in memory.”
Company-Specific Challenges
Amazon: AI Spending vs. Core Business Slowdown
Amazon’s earnings report highlighted a disconnect between its AI ambitions and core business performance. While the company’s AWS cloud unit is projected to grow over 40% in the next two years, growth in its online shopping business has slowed. Investors have grown cautious about the company’s $220 billion capital expenditure plan, which Jassy described as necessary for long-term AI infrastructure development.
The company’s Prime Day shift to the second quarter also contributed to weaker-than-expected third-quarter results, though some analysts noted that excluding this factor, the numbers appeared more favorable.
Intel: PC Market Decline and Supply Chain Pressures
Intel’s 26% stock drop reflects broader challenges in the semiconductor industry, including:
- Declining PC sales, which have weighed on its client computing division.
- Rising memory chip costs, with SK Hynix warning that high-bandwidth memory shortages will persist until 2030.
- Weaker-than-expected fourth-quarter guidance, with profits and sales falling short of forecasts by as much as $3 billion.
The company’s leadership has acknowledged that 2027 could be a challenging year, with CEO Lip-Bu Tan stating that “the whole market is impacted” by these issues.
Alphabet: AI Competition and Search Monetization Fears
Alphabet’s 14% stock decline was driven by two primary concerns:
- Google Search monetization fears: Investors are questioning whether AI-driven changes to search will reduce ad revenue.
- Gemini’s competitive positioning: The company’s AI chatbot is perceived to be falling behind rivals, prompting suggestions for radical restructuring, including potential mergers between Google Search and Gemini.
The stock’s decline marked its worst single-day drop since the company’s 2004 IPO.
Investor Sentiment and Long-Term Outlook
The tech sell-off has triggered debates about the long-term viability of AI investments. While some firms, such as Nvidia and Arm, have seen declines in premarket trading, others like Meta Platforms have shown relative resilience, with its advertising business performing better than expected compared to competitors like Reddit.
Analysts warn that the current downturn could signal a shift in investor sentiment, with growing skepticism about whether AI infrastructure spending will deliver the expected returns. The Nasdaq’s decline—now down more than 5% from its May peak—has pushed several major tech stocks into “bear market” territory, defined as a 20% drop from their peak valuations.
The broader implications for global markets remain uncertain, with some strategists urging caution while others suggest the sell-off may present buying opportunities for long-term investors.