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Tech Stocks Plunge Amid AI Spending Concerns
· Confirmed
In Short: Tech stocks plunged amid concerns over the massive spending required to build artificial intelligence infrastructure, despite positive earnings from some companies.
Tech stocks continued to face pressure as concerns over the cost of artificial intelligence (AI) investments persisted, despite positive earnings reports from Microsoft.
Investors are increasingly worried about whether the enormous spending required to build AI infrastructure will generate sufficient returns, with Google's weakness highlighting these concerns.
Trillion-dollar tech companies like SpaceX and Tesla are facing scrutiny over their spending on AI, with SpaceX losing $400 billion in market value in a single day.
Samsung Electronics became the first tech company to post quarterly operating profit of more than 100 trillion won, but this did not alleviate concerns about AI spending.
Tech stocks tumbled for the second day in a row, with the Nasdaq 100 falling more than 5.8 percent in October.
Meta's plans for a record $97.5 billion fund raise have heightened concerns about shareholder dilution and the impact of mounting AI spending.
Major tech companies, including Meta, Alphabet, Oracle, Amazon, and Microsoft, have committed to spending $800 billion on AI by 2026, but their earnings are not always meeting analysts' expectations.
The tech-heavy Nasdaq and S&P 500 experienced their worst one-day performances since June, with the Nasdaq falling 2.9% and the S&P 500 dropping 1.8%.
Some tech giants, including Microsoft, are experiencing negative free cash flow due to their investments in AI infrastructure.
Alphabet's latest results intensified concerns about the financial returns from AI spending, with its shares falling 10.5% in premarket trading.
The downturn was sparked by Alphabet Inc.’s earnings report, which revealed high capital expenditures without the expected returns, causing its stock to drop over 5%.
What this adds
While some tech companies are seeing increased revenue from computing power, the overall impact on free cash flow remains a concern.
The tech sector's volatility is also reflected in increased options trading, indicating heightened uncertainty among investors.
What's confirmed
- Partly in response to this massive spending, stocks tumbled on Friday, leading both the Nasdaq and the S&P 500 to their worst one-day performances since June.
What's still developing
- The closure comes as tech-heavy markets in Taiwan, South Korea and Japan have come under pressure amid investor scrutiny of global technology companies’ earnings and lofty spendings on AI.
- He emphasized that Trump was more focused on his relationship with Chinese President Xi Jinping and the tech executives gathered at the White House than on addressing the concerns Americans are facing, including the need for AI regulation, high diesel prices, and high mortgage rates.
- Well, Senator Michael Bennet is proposing a new federal agency to oversee artificial intelligence and major tech companies.
- The stock’s market capitalization slipped below $2 trillion as losses accumulated over four consecutive trading days.
- First Big Tech Firm to Break 100 Trillion Won in a Quarter Preliminary Figure of 107 Trillion Won Doubles Alphabet, Microsoft Only Company Besides Aramco to Reach the Mark Full-Year Operating Profit Crown Effectively Secured Samsung Electronics (005930.KS) has become the first technology company in the world to post quarterly operating profit of more than 100 trillion won.
- Insiders at the firm fear tech’s advancement could cause human extinction, while others are calling their declarations of concern a ‘setup’ Insiders at the firm fear tech’s advancement could cause human extinction, while others are calling their declarations of concern a ‘setup’ A day after a former researcher at Anthropic made an apocalyptic declaration about artificial intelligence, more researchers and staff members at the AI startup publicly agreed with him and posted their own dire warnings.
- Analysts note that while near-term rate hike expectations have receded, solid growth prospects and lingering inflation concerns are exerting upward pressure on long-term yields.
- DEVELOPING: Tennessee death row inmate Christa Pike is still alive after two lethal injections, her lawyer says Oil prices surged Tuesday after the U.S. military announced further strikes against Iran, deepening inflation concerns and extending an earlier market sell-off in stocks and bonds.
- Alphabet's stock market value fell sharply on Thursday, taking more than $500bn (£374bn) off its market value after it revealed the AI summaries it now provides as the top answer to search queries were affecting its core search advertising revenue.
- Nvidia, a leader in AI chip technology, fell by 6.8%, while Broadcom lost 7.6%.
- The tech sector’s volatility was further underscored by increased options trading.
- Several major tech firms have reported earnings this week, including Microsoft, and analysts said there were questions about the payout from the huge investments in AI.