Wall Street suffered a steep day of losses Friday after the latest tech earnings reignited concerns that massive spending on AI may not deliver the returns that investors expect.
The Nasdaq Composite dropped 2.86% and the S&P 500 fell 1.82%, each suffering their worst day since June. The Dow fell 572 points, or roughly 1.1%.
Just a few weeks ago, the Nasdaq and S&P 500 clinched record highs. But markets were rattled this month as concerns festered about higher interest rates, tech companies burning through cash on enormous AI spending and weaker-than-expected earnings and forecasts.
The Nasdaq is now down 7.8% from its record high earlier this month and suffered its worst monthly decline since March 2025. The S&P 500 is down roughly 3% since its peak.
Intel plunged 28.58% Friday, its worst day since 1974 and second-worst day on record, after issuing weaker guidance for the fourth quarter, citing weakness in the PC market because higher memory chip costs hurt consumer demand.
Amazon shares also dropped, falling 1.4% following an earnings report that indicated further increases in AI spending while the company’s sales and profit results missed analysts’ expectations.
This comes after shares of Alphabet sank by more than 12% Thursday, wiping half a trillion dollars off the market value of America’s fourth-largest company. Investors were concerned about a slowdown in Google’s search advertising business and a ramp-up in AI spending. Alphabet shares fell another 1.4% on Friday, capping off their worst month on record.
Investors’ concerns about the AI boom rattled other semiconductor chipmakers: Nvidia shares dropped 4.2%, while a closely watched index of chipmakers sank 7.2%.
Alphabet, Microsoft, Meta and Amazon are collectively spending hundreds of billions of dollars on building data centers. After cheering on anything AI-related, Wall Street is getting more discerning about which companies are spending rationally and seeing tangible returns on investment.
Friday was the final trading day of a bruising month for AI stocks as investors continue to scrutinize the enormous cost of the AI boom and demand evidence that those investments will eventually translate into profit.
“We’re moving out of the hopes and dreams phase of the AI trade and into the ‘show me’ phase,” Joe Tigay, portfolio manager at Equity Armour Investments, said in a note.
“Full order books are great, but investors want to see who can actually deliver, turn that demand into earnings and generate cash,” he said.
Alphabet’s earnings results on Wednesday ignited concerns that Google’s core business of search advertising revenue is threatened by consumers using AI chatbots instead of traditional search.
Alphabet’s promise of returns from AI “is getting pushed even further down the road,” Matt Maley, chief strategist at Miller Tabak + Co, said in a note. “It raises the question as to whether the payout will be as big as they have been promising.”
As Big Tech ramps up its spending, investors are getting nervous about its impact to their balance sheets. Google just posted two quarters of negative free cash flow for the first time on record as AI spending accelerates while revenue isn’t growing as fast as expected.
Meta last week disclosed a quarter of negative free cash flow for the first time since 2012. Amazon on Thursday announced it had negative free cash flow of $42.4 billion over the past 12 months as the company ramps up AI spending.
“Investors don’t just want capex, they want to see the returns already,” Neil Wilson, a strategist at Saxo Markets, said in a note. “For the wider AI trade, we are starting to see a more critical evaluation of the return on investment from this monster AI splurge.”
The markets are starting to act seriously weird. Blame AI
Google and Meta are in a bear market, down more than 20% since their peaks in May and August 2025, respectively. In contrast to Google, Meta and Amazon, Microsoft this week announced $18.6 billion in positive free cash flow this past quarter, and its stock is down just 4% since its record high earlier this month.
Investors are increasingly pointing to companies’ race to secure capital — by tapping debt and equity markets — as a sign that the AI boom is entering a new phase. Higher interest rates are also weighing on riskier, debt-fueled corners of the AI buildout, adding to jitters.
Anthropic’s highly anticipated filing for its initial public offering on Monday gave a brief boost to tech stocks, before the sentiment turned sour midweek over Big Tech earnings.
“The AI trade is down, but not out,” said Paul Stanley, managing director at Arca, in a note Friday morning. “This is not the first tech and AI correction, and it won’t be the last. We are still in the very early stages of AI development, and pullbacks are par for the course.”
Adding to market jitters Friday: Bitcoin fell more than 4% over the past day, hitting its lowest level in more than a month, after the world’s largest crypto exchange was hit by the biggest heist on record.
After an enormous rally this year, investors’ expectations for chipmakers continue to rise, and companies are struggling to impress Wall Street. Despite losing nearly a third of its value on Friday, Intel shares are still up 78% this year.
“A lot of these names, Intel is no exception, they just had a phenomenal year already. So, there’s definitely some profit taking as a result,” said Mike Dickson, head of research and quantitative strategies at Horizon Investments.
As investors dumped tech stocks, they rotated into defensive parts of the market, like the consumer staples sector and government bonds.
Other corners of the tech industry have also been rattled as investors scrutinize earnings and demand evidence that companies will benefit, rather than be threatened, by developments in AI. Shares of software company ServiceNow plunged 27% on Thursday, their worst day on record, after the company’s profit results slightly missed Wall Street’s expectations.
“The market doesn’t like uncertainty,” said Ted Mortonson, a tech strategist at Baird. “People just get out of the way until they can figure it out.”