The S&P 500 tumbled 1.8 per cent for its worst day since June, closing out a third-straight losing week as technology stocks dragged the Nasdaq composite down a market-leading 2.9 per cent and the Dow Jones Industrial Average dropped 572 points, or 1.1 per cent.
The US market remains only 3.1 per cent below its all-time high, but it has become increasingly shaky as Tuesday's midterm elections approach. Worries about AI have become a concern for voters across political parties, and President Donald Trump has historically used the stock market's performance as a measure of his own success.
The heaviest force pulling the S&P 500 down was Nvidia, which fell 4.2 per cent, but the day's biggest single-stock move came from Intel. The chipmaker plunged 28.6 per cent, its worst drop since 1974, after forecasting profit for the final three months of the year below analysts' expectations. Chief executive Lip-Bu Tan said the personal-computer industry continued to feel pressure. The drop came even though Intel reported a stronger profit for the latest quarter than analysts expected.
Amazon fell 1.4 per cent after reporting a weaker profit for the summer than analysts expected. It said it burned through $US42.4 billion ($60.3 billion) of cash over the prior 12 months, a measure known as free cash flow, and spent $US94.8 billion ($134.8 billion) on property and equipment, primarily through investments in artificial-intelligence technology. A day earlier, Alphabet fell more than 12 per cent, its worst day on record, after telling investors it burned through more cash during the summer than in the spring, citing similar investments in AI.
Worries are rising about whether the hundreds of billions of dollars being piled into AI will produce enough profit and productivity to justify the spending. Stocks of chip companies and other winners from the rush to build AI data centres have also come under pressure on concerns that high interest rates may slow the further build-out. “We're moving out of the hopes and dreams phase of the AI trade and into the 'show me' phase,” said Joe Tigay, portfolio manager at Equity Armor Investments.
In crypto, stocks tumbled after a hack on the world's biggest exchange. Bitcoin fell below $US77,000 ($109,500), from more than $US86,000 ($122,300) earlier this month, and a US-based blockchain intelligence firm said a North Korean unit was likely behind the attack, which affected more than $US6 billion ($8.5 billion) worth of crypto at Binance. Coinbase Global fell 10.6 per cent despite stronger quarterly results than analysts expected, and Strategy, which says it owns about 4 per cent of the total bitcoin supply, fell 7.8 per cent. It also reported a stronger profit for the latest quarter than analysts expected, while saying its chief financial officer will resign next week for personal reasons.
European indexes were mixed after sharper swings in Asia. South Korea's Kospi dropped 3.5 per cent as AI worries hit its tech-heavy market, Hong Kong's Hang Seng climbed 1.5 per cent, and Japan's Nikkei 225 fell 2.1 per cent after the Bank of Japan left interest rates steady, echoing moves earlier in the week by the Federal Reserve and the European Central Bank.
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Daily percentage change in major US stock indices
%
All values are declines; Dow fell 572 points, or 1.1%. Source: Stock exchange data
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Analysis
Why This Matters
The sell-off shows investors demanding evidence that hundreds of billions in AI spending will turn into profits, with strong quarterly results from Intel, Coinbase and Strategy failing to protect their shares.
The market enters Tuesday's midterm elections about 3 per cent below its record, and President Donald Trump has historically used the stock market's performance as a measure of his own success.
The Binance hack has pushed bitcoin below $US77,000 and hit crypto-related stocks, adding another source of stress to global markets.
Background
The recent bull run has been driven heavily by technology megacaps and enthusiasm for AI, with companies including Alphabet, Amazon and Intel pouring money into chips and data-centre capacity. This week's losses reflect a shift in that enthusiasm as investors focus on whether the spending will deliver the profits and productivity gains that support current valuations.
Key Perspectives
Lip-Bu Tan (Intel CEO): says the personal-computer industry continued to feel pressure, explaining the weak profit forecast.
Joe Tigay (portfolio manager, Equity Armor Investments): says the market is "moving out of the hopes and dreams phase of the AI trade and into the 'show me' phase."
A US-based blockchain intelligence firm: says a North Korean unit was likely behind the attack on Binance that affected more than $US6 billion in crypto.
What to Watch
How the market reacts to Tuesday's midterm elections, given Trump's historical use of stock market performance as a measure of his success.
Whether more AI-related earnings and forecasts add to the pressure on chipmakers and other data-centre suppliers.
Whether bitcoin's slide below $US77,000 extends, and what further details emerge about the Binance hack and its impact on crypto stocks.
12 claims in this story checked against 1 source: 12 supported.
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SupportedWall Street had its worst day since June as the tech sell-off deepened.Just In: “Wall Street drops to worst day since June after tech stocks sell-off deepens.”
SupportedThe S&P 500 fell 1.8 per cent, its worst day since June.Just In: “The S&P 500 tumbled 1.8 per cent for its worst day since June”
SupportedThe S&P 500 closed out a third-straight losing week.Just In: “as it closed out a third-straight losing week.”
SupportedTechnology stocks dragged the Nasdaq composite down 2.9 per cent, a market-leading fall.Just In: “The weakness for technology stocks dragged the Nasdaq composite down a market-leading 2.9 per cent”
SupportedThe Dow Jones Industrial Average fell 572 points, or 1.1 per cent.Just In: “while the Dow Jones Industrial Average dropped 572 points, or 1.1 per cent.”
SupportedIntel fell 28.6 per cent, its worst drop since 1974.Just In: “Intel's stock led the way lower and plunged 28.6 per cent for its worst drop since 1974.”
SupportedIntel’s forecast for profit in the final three months of the year fell short of analysts’ expectations.Just In: “The chipmaker gave a forecast for profit in the final three months of this year that fell short of analysts' expectations”
SupportedJoe Tigay said, “We're moving out of the hopes and dreams phase of the AI trade and into the 'show me' phase.”Just In: “"We're moving out of the hopes and dreams phase of the AI trade and into the 'show me' phase," said Joe Tigay, portfolio manager at Equity Armor Investments”
SupportedNvidia was the heaviest force pulling the S&P 500 down.Just In: “A drop of 4.2 per cent for Nvidia, the chip company that became the poster child of the AI frenzy, was the heaviest force pulling the S&P 500 downward”
SupportedAmazon reported $US42.4 billion in cash burn over the prior 12 months, measured as free cash flow, and spent $US94.8 billion on property and equipment.Just In: “it burned through $US42.4 billion ($60.3 billion) of cash over the prior 12 months, according to a measure called free cash flow. It spent $US94.8 billion ($134.8 billion) on property and equipment”
SupportedA US-based blockchain intelligence firm said a North Korean unit was likely behind the Binance hack, which affected more than $US6 billion worth of crypto.Just In: “a US-based blockchain intelligence firm said a North Korean unit was likely behind the attack that impacted more than $US6 billion ($8.5 billion) worth of crypto at Binance”
SupportedBitcoin fell below $US77,000 from more than $US86,000 earlier in the month.Just In: “The price of bitcoin fell below $US77,000 ($109,500) from more than $US86,000 ($122,300) earlier this month”
