Tech Stocks Tumble as AI Spending Outpaces Returns — SkimNews
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- Intel saw its stock plummet 28% and lost over $130bn in market value after forecasting lower-than-expected revenue and confirming it would spend more than it earns this year due to increased AI investments despite weak PC demand.
- Alphabet lost more than $500bn in market value after revealing its AI-generated search summaries are undermining core advertising revenue, and the company expects to spend up to $205bn this year almost entirely on AI.
- Amazon reported cash outflows exceeding inflows with a six-fold increase in spending over three months, committing $220bn this year to AI infrastructure like data centers, servers, and network equipment.
- Reddit stock dropped 29% after reporting weaker-than-expected daily user growth and citing declining referral traffic due to Google’s AI-driven search results.
- Nasdaq ended October with its worst monthly performance since March 2025, closing 2.8% lower on Friday as tech-wide concerns over AI profitability intensified.
- Roblox shares fell 18% as daily active user numbers declined, adding to sector-wide concerns about user engagement and monetization in the face of rising AI costs.
- Analysts noted that investors have turned 'ruthless,' punishing any earnings disappointment, as the market questions whether AI investments will generate returns sufficient to justify current valuations.
Why it matters: Tech investors are shifting from growth-at-all-costs to demanding profitability, putting pressure on companies like Intel and Alphabet that are spending hundreds of billions on AI without clear near-term returns. With the Nasdaq down 3% in two days and firms collectively committing $800bn to AI by 2026, the market is now pricing in the risk that AI spending may outpace revenue, altering the sector’s investment calculus.
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