Amazon and Intel shares fell sharply in premarket trading on Friday after both companies reported disappointing quarterly results, dragging Nasdaq futures down 2% and capping a week of rough tech earnings.
Amazon shares were down 7% and Intel shares down 25% in pre-market trade on Friday, after the companies reported September quarter numbers that fell short of investor expectations. Amazon reported a third-quarter miss on both revenue and profit, while maintaining its capital expenditure forecast for 2026 of $220 billion this year. The company also reported negative free cash flow for the second consecutive quarter, a larger deficit than the previous period. Intel issued weaker-than-expected guidance, citing ongoing softness in the PC market.
The declines extended beyond the two companies. Chip stocks including Micron, Nvidia and Arm were lower in US premarket trade, while major European semiconductor names such as ASML also saw sharp declines. Nasdaq-100 futures were down 2% in early trading, which could put the tech-heavy index into negative territory this week.
Investors are nervous about the massive AI spending from the tech giants and whether it will pay off. On Thursday, Alphabet shares closed 13% lower, their worst single-day drop in history, after it too reported ballooning negative free cash flow. Microsoft shares rose after it remained cash flow positive in the September quarter.
Despite the recent falls, the Nasdaq Composite index is up more than 12% year-to-date as of Thursday's close.
Matt Orton, chief market strategist at Raymond James, told CNBC's "Squawk Box Europe" that while "the here and now can be painful … the fact of the matter is the fundamentals by and large still remain in place, especially across the AI capex beneficiary part of the market." Orton said he is "generally okay" with these companies turning free cash flow negative as it is for a "temporary period."
Analysis
Why This Matters
- The slide in Amazon and Intel shares signals growing investor concern about the massive capital spending on artificial intelligence and whether it will generate returns.
- Broader tech stock declines, including Alphabet's worst single-day drop, suggest a potential market reassessment of the sector's valuations.
- The sell-off could affect retirement and investment portfolios, as tech stocks form a large part of major indices.
Background
Technology stocks have been a major driver of market gains over the past two years, fueled largely by enthusiasm for AI. Major companies have been spending heavily on data centers, chips, and infrastructure to support AI products. This week's earnings reports have brought those spending plans into focus, with investors scrutinising cash flow and profitability.
Key Perspectives
Matt Orton (Chief Market Strategist, Raymond James): does not think this is "a moment of reckoning" but rather a time for investors to consider that "positioning across the space still remains crowded even though the fundamentals are strong." He remains positive on AI capex beneficiaries.
Investors: appear to be selling off shares of companies that report negative free cash flow, as seen in Amazon and Alphabet's drops, while rewarding Microsoft for remaining cash flow positive.
What to Watch
- Whether the sell-off continues into the next trading week, potentially pushing the Nasdaq into correction territory.
- Upcoming earnings reports from other major tech companies, including Apple and Meta, for further signs of investor sentiment.
- Any changes to capital expenditure plans from Amazon or other tech giants in response to market pressure.
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12 claims in this story checked against 1 source: 12 supported.
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- SupportedOrton said, “the here and now can be painful … the fact of the matter is the fundamentals by and large still remain in place, especially across the AI capex beneficiary part of the market.”Tech: “While the here and now can be painful … the fact of the matter is the fundamentals by and large still remain in place, especially across the AI capex beneficiary part of the market.”
- SupportedOrton said he is “generally okay” with the companies turning free cash flow negative for a “temporary period.”Tech: “Orton said he is "generally okay" with these companies turning free cash flow negative as it's for a "temporary period."”
- SupportedOrton made the quoted remarks to CNBC’s “Squawk Box Europe.”Tech: “Matt Orton, chief market strategist at Raymond James, told CNBC's "Squawk Box Europe" on Friday.”
- SupportedAmazon and Intel shares fell sharply in premarket trading after both companies reported disappointing quarterly results.Tech: “Amazon and Intel shares were down in premarket trading on Friday after they reported September quarter numbers that disappointed investors”
- SupportedNasdaq futures fell 2% amid a week of rough tech earnings.Tech: “dragging Nasdaq futures down 2% and capping off a week of rough tech earnings.”
- SupportedIn Friday premarket trading, Amazon was down 7% and Intel was down 25%.Tech: “Amazon shares were down 7% in premarket trading, while Intel was down 25%.”
- SupportedAmazon missed investor expectations for both revenue and profit in the third quarter.Tech: “Amazon reported a third-quarter miss on the top and bottom line”
- SupportedAmazon maintained a 2026 capital expenditure forecast of $220 billion this year.Tech: “while maintaining its capital expenditure forecast for 2026 of $220 billion this year.”
- SupportedAmazon reported negative free cash flow for a second consecutive quarter, with a larger deficit than in the previous period.Tech: “Amazon also reported negative free cash flow for the second consecutive quarter, much larger than the previous period.”
- SupportedIntel issued weaker-than-expected guidance, citing ongoing softness in the PC market.Tech: “Intel issued weaker-than-expected guidance, citing ongoing softness in the PC market.”
- SupportedAlphabet shares closed 13% lower on Thursday, its worst single-day drop in history.Tech: “On Thursday, Alphabet shares closed 13% lower, its worst single-day drop in history”
- SupportedThe Nasdaq Composite was up more than 12% year-to-date as of Thursday’s close.Tech: “the Nasdaq Composite index is up more than 12% year-to-date as of Thursday's close.”
