Wall Street Sell-Off: AI Spending Fears Hammer Chip and Crypto Stocks

U.S. equity markets slumped on Friday as investors reacted to corporate earnings reports and large capital expenditures on artificial-intelligence technology. The S&P 500 declined 1.6% by 11:48 a.m. Eastern time, putting the index on pace to erase its gains for October. The technology-heavy Nasdaq composite fell 2.5% during the same period.

The downturn follows a series of recent corporate disclosures regarding investment in computing infrastructure. On Thursday, Alphabet's stock dropped more than 12%, marking its worst day on record, after the company reported increased cash consumption during the summer compared with the spring. The company attributed this change to investments in artificial intelligence.

Friday's trading saw Intel shares fall 28.6%, approaching the stock's worst single-day performance since 1974. The decline occurred despite the chipmaker reporting quarterly profit figures that exceeded analyst estimates. Intel provided a profit forecast for the final three months of the year that fell short of Wall Street's expectations. CEO Lip-Bu Tan stated that the personal-computer industry continues to face pressure, affecting demand for Intel's central processing units.

Amazon shares declined 1.9% after the company reported summer profit results below analyst projections. Investors also noted that Amazon consumed $42.4 billion in cash over the previous 12 months as measured by free cash flow. The company spent $94.8 billion on property and equipment during that period, with the majority directed toward artificial-intelligence technology.

Nvidia dropped 3.8%, contributing the largest downward pressure on the S&P 500 index. In the cryptocurrency sector, Coinbase Global fell 13% and Strategy declined 7.5% following a security breach at Binance. A U.S.-based blockchain intelligence firm indicated a North Korean unit was likely responsible for the attack, which affected more than $6 billion in cryptocurrency. Strategy reported that its chief financial officer will resign next week for personal reasons.

The technology sell-off extended to Asian markets. South Korea's Kospi index dropped 3.5%, while Japan's Nikkei 225 declined 2.1% following the Bank of Japan's decision to maintain current interest rates. In the bond market, the yield on the 10-year Treasury note decreased to 4.95% from 4.98% late Thursday.

Energy and consumer goods companies reported different results. Exxon Mobil rose 1.2% and Chevron gained 2.6% after both companies reported profits above analyst expectations. Mondelez International increased 3.7% and Colgate-Palmolive rose 2.9% following their respective earnings reports. Brent crude oil prices increased 1.9% to $112.86 per barrel.