Nasdaq hits near three-month low as Amazon, Intel deepen AI capex concerns

The Nasdaq tumbled to its lowest in nearly three months on Friday after Amazon's aggressive AI spending plan and Intel's cash burn warning intensified concerns over mounting costs of AI infrastructure buildout and the timeline for returns.

Amazon.com slipped 2 percent after the company reported a sharp cash outflow in the third quarter and signaled another increase in capital expenditure next year, on top of already elevated outlays. It pared much of its premarket declines.

Intel tanked more than 30 percent, set for its biggest one-day loss on record, after the chipmaker warned it would burn cash this year due to a weak market for personal computers, manufacturing hurdles and heavy spending to expand production.

The decline sparked a selloff in global chip stocks, with Nvidia down 3 percent and AMD sliding 9.3 percent. The broader chips index shed 5.7 percent. Server makers Dell and HP lost about 9 percent each.

Amazon and Intel were set to wipe out about US$200 billion in combined market value, if losses hold, putting the Nasdaq-100 on track to erase just over US$1 trillion. The index is set to shed over US$2 trillion this month.

"It's more a question of what is priced into a stock and how much investors are expecting. Alphabet, Amazon and Intel fall into the category where it doesn't take much to trigger a significant disappointment," said Art Hogan, chief market strategist at B. Riley Wealth.

"I don't think this is a broader reset.. It's more of a rotation out of an extremely popular technology trade and into safer havens."

Consumer staples and healthcare indexes, traditionally considered defensive sectors, were up 1.9 percent and 1.7 percent, respectively.

The S&P 500 information technology index was the biggest drag, down 3.4 percent and set for its biggest one-day fall since June 23. The communication services index lost 0.7 percent and was headed for its worst month since April 2022.

Alphabet slipped 1.2 percent, after a record selloff in the previous session when the Google parent reported disappointing results in its search-advertising business and a sharp increase in cash outflows.

Microsoft however delivered a big cash-flow beat, though it raised US$25 billion through a debt sale.

At 09:53 a.m. ET, the Dow Jones Industrial Average fell 203.15 points, or 0.39 percent, to 52,139.41. The S&P 500 lost 94.01 points, or 1.22 percent, to 7,626.38, while the Nasdaq Composite shed 578.39 points, or 2.21 percent, to 25,606.33.

Energy stocks were supported by a 1.7 percent and 2.7 percent gain in Chevron and Exxon, respectively, after they beat third-quarter profit estimates.

All three indexes were on course for weekly losses. While the Dow was on track for monthly gains, the Nasdaq was set to snap a two-month winning streak in October.

Expectations that the US Federal Reserve, according to LSEG data, would raise interest rates by more than 50 basis points by mid-2027, added to AI capex concerns as companies increasingly rely on debt to fund their buildout, and higher borrowing costs could make such spending harder to justify.

The central bank held rates steady earlier this week, as expected.

Among other movers, social media platform Reddit slid 26 percent after CEO Steve Huffman warned that total daily active unique visitors could fall by a low double-digit percentage in the fourth quarter.

Declining issues outnumbered advancers by a 1.31-to-1 ratio on the NYSE and by 2.4-to-1 on the Nasdaq. 

The S&P 500 posted 39 new 52-week highs and four new lows, while the Nasdaq Composite recorded 51 new highs and 160 new lows.

Reuters

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