Intel falls 30% as Wall Street questions AI spending

Intel shares fell 30% on Friday, marking the company's steepest single-day drop since 1974. The sell-off dragged the Nasdaq composite down 3.1%, heading toward its worst day since June. The S&P 500 lost 1.9%, erasing its gains for October despite having set an all-time high earlier in the month.

Investors reacted to Intel's forecast for the final three months of the year. CEO Lip-Bu Tan noted that the personal-computer industry continues to face pressure. The profit outlook fell short of analyst expectations, even though Intel reported a stronger profit for the current quarter than predicted.

Concerns over artificial intelligence spending are driving the decline. Amazon sank 2.1% after reporting weaker summer profits than expected. The company revealed it burned through $42.4 billion in cash over the past 12 months. It spent $94.8 billion on property and equipment, primarily for AI technology.

Nvidia, the leading supplier of chips for AI, saw its stock drop 4.8%. This was the heaviest force pulling the S&P 500 downward. Alphabet, the parent company of Google, had seen its stock fall more than 12% the previous day. That move was its worst on record, driven by reports of increased cash burn during the summer.

Joe Tigay, a portfolio manager at Equity Armor Investments, told investors that the market is moving out of the hopes and dreams phase of the AI trade. He stated that it is now in the show me phase. Investors are questioning whether hundreds of billions of dollars in investment will produce enough profit to justify the cost.

Outside the technology sector, many stocks rallied. ExxonMobil climbed 2% and Chevron added 1.7% after both reported stronger summer profits than analysts expected. Mondelez International rose 3.9% and Colgate-Palmolive climbed 3.6% on better-than-expected results. These gains helped keep the number of rising stocks in the S&P 500 nearly equal to the number of falling stocks.

In the cryptocurrency market, stocks tumbled following a hack on the world's largest exchange. A U.S.-based intelligence firm said a North Korean unit was likely behind the attack, which impacted more than $6 billion in crypto assets at Binance. Bitcoin prices fell toward $77,000 from more than $86,000 earlier in the month. Coinbase Global fell 13.4%, and Strategy, which holds about 4% of the total bitcoin supply, dropped 8.7%.