Tech Stocks Tumble as AI Spending Fails to Pay Off — SkimNews
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- Alphabet's market value dropped over $500bn after revealing its AI search summaries are undermining core ad revenue, and it expects up to $205bn in AI-related spending this year.
- Intel shares fell as much as 30%, on track to lose over $130bn in value, as the company confirmed increased AI spending despite forecasting lower Q4 revenue and negative cash flow for the year.
- Amazon stock dropped 6% overnight after reporting cash outflows and a six-fold increase in spending over three months, with $220bn committed this year to AI infrastructure like data centers and servers.
- Reddit's stock sank 26% after disclosing weaker daily user growth and warning that Google's AI search is reducing referral traffic to its platform.
- Nasdaq declined more than 3.5% on Friday, extending losses as investor confidence waned over AI profitability, despite the index remaining up 7.6% over the past year.
- Kathleen Brookes of XTB noted investors have become 'ruthless' in punishing underwhelming earnings, signaling a shift from speculative AI investment to demand for tangible returns.
Why it matters: Tech investors are now prioritizing profitability over growth, punishing companies like Alphabet and Intel that report heavy AI spending without clear revenue gains. With combined AI commitments nearing $1tn, any sustained mismatch between investment and returns could trigger broader sector devaluations and a rotation out of AI-exposed equities.
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