The Nasdaq Composite Index dropped more than 970 points, or 3.7%, in afternoon trading on Friday as investors reassessed the technology sector following a wave of disappointing earnings reports. Intel's stock fell more than 30%, while Alphabet's Class A shares declined more than 12%, marking the worst day for the company since it went public as Google in 2004 and erasing roughly 500 billion dollars from its market value. Nvidia, whose chips power artificial intelligence models, fell 5%. The tech slump rippled across broader markets, with the S&P 500 shedding 183 points, or 2.4%, and the Dow Jones Industrial Average dropping 746 points, or 1.4%.
Market analysts pointed to a troubling pattern underlying the selloff. Adam Crisafulli, head of Vital Knowledge, said this has been one of the worst tech earnings seasons in memory, with underwhelming results from prominent companies. Crisafulli warned that the deterioration in tech sentiment could have real consequences beyond Wall Street, making it harder for companies to raise debt and equity financing. Adam Turnquist, chief cross-asset strategist for LPL Financial, noted that mega-cap stocks have faced increased selling pressure over the past two weeks as elevated artificial intelligence spending and rising financing costs raise concerns over profitability, with recent earnings revealing slowing growth in some hyperscalers' core businesses.
Investor concerns centre on whether massive investments in artificial intelligence will deliver the returns Wall Street expects. Many are worried about the sustainability of debt companies are taking on to finance data center capital expenditures. Adding to pressure on tech valuations, many economists expect the Federal Reserve will raise interest rates as early as December and into 2027, making it more expensive for companies to borrow money to build the data centers required for artificial intelligence services. The Fed left its benchmark rate unchanged this week. Ulrike Hoffmann-Burchardi, chief investment officer for Americas and global head of equities for UBS' Chief Investment Office, advised clients to diversify beyond artificial intelligence, saying high expectations and potentially wide differences in company outcomes underscore the risks of concentrated stock holdings.
Despite the sharp losses, U.S. stocks remain only 3.4% below their all-time high. Cryptocurrency prices also fell after hackers linked to North Korea stole more than 6 billion dollars from Binance, the world's largest crypto exchange. The price of bitcoin declined toward 77,000 dollars, down from more than 86,000 dollars earlier this month. For savers and investors in the U.S., the steep tech selloff threatens the value of retirement accounts and investment portfolios, particularly those concentrated in technology stocks, even though markets remain near record levels.