US technology stocks suffered sharp declines for the second consecutive day on Friday, driven by mounting investor concerns over the hundreds of billions of dollars companies are pouring into artificial intelligence. Major tech firms including Intel, Alphabet, Amazon, and Reddit experienced significant drops, pushing the Nasdaq index to its worst monthly decline since March 2025.
Massive AI Investments and Falling Returns
Although technology companies are spending heavily on artificial intelligence, their earnings frequently fail to meet analysts’ expectations, triggering market anxiety and fears of an AI bubble. Meta, Alphabet, Oracle, Amazon, and Microsoft have collectively committed to spending $800 billion in 2026. On Thursday, Alphabet lost more than $500 billion in market value after reporting that its new AI search summaries were negatively impacting core search advertising revenue. At the same time, Alphabet expects to invest up to $205 billion this year, largely directed toward artificial intelligence.
Intel shares plummeted 28% on Friday as the chip maker shed over $130 billion in value. The company announced plans to increase AI spending despite declining computer demand, which serves as a major market for its micro-processors. In the third-quarter earnings report, Intel finance chief David Zinsner stated that the firm anticipated lower-than-expected fourth-quarter revenue and did not expect to bring in more cash than it spent this year. He explained that the personal computer slowdown would likely continue through at least the first half of next year, adding that equipment investments had increased significantly and would accelerate further in the following three months.
Amazon revealed on Thursday that its spending had multiplied six-fold over a three-month period, committing $220 billion this year to AI data centres, network equipment, and servers. Although Amazon shares recovered some overnight losses, they closed down 1.4% on Friday. Meanwhile, Reddit stock plunged 29% following weaker-than-expected daily user figures and warnings that Google’s AI-driven search was reducing referral traffic. Roblox shares also dropped 18% due to declining daily active user numbers.
Analyst Reactions and Market Outlook
Chris Low from FHN Financial told Reuters that market movements were primarily a reaction to major players like Amazon and Google demonstrating significant growing pains while aggressively pursuing AI infrastructure. Kathleen Brookes, research director at XTB, noted that investors have become ruthless in punishing any disappointment in third-quarter earnings. She pointed out that while the AI trade enjoyed a strong run in recent years, investors now demand financial returns. Despite the recent sell-off, stock values for many of these firms remain well above their levels from a year ago. The Nasdaq closed 2.8% lower but remains up 7.8% over the past year. Brookes added that if AI stocks continue struggling, it could indicate that the AI trade has peaked and prompt investors to seek a new market theme.
