AI Selloff Deepens as Intel, Amazon Drag Nasdaq Futures Down 2.6%
Nasdaq 100 futures fell 2.6% Friday as Intel and Amazon deepened investor worries over AI costs, a day after Alphabet's record drop.
A selloff in artificial intelligence stocks gathered pace before the opening bell on Friday, Oct. 30, as weak results from Intel and Amazon added to doubts about the cost of the AI buildout. Reuters reported that Nasdaq 100 E-mini futures were down 768.75 points, or 2.6%, at 8:15 a.m. ET, while S&P 500 E-minis had lost 86.5 points, or 1.12%. Dow E-minis were roughly flat, down 42 points, or 0.08%. Those are premarket figures and do not reflect where the session will close.
What happened
Intel, the US chipmaker, led the declines. Reuters said its shares tanked more than 25% after it warned it would burn cash this year, while a Yahoo Finance live blog cited drops of 25% and 26% at different points in the morning.
The slide came despite a third-quarter beat. Investing.com reported adjusted earnings of $0.52 a share against the $0.40 analysts expected, and revenue of $16.5 billion, up 21% from a year earlier. Data center and AI revenue climbed 78% to $7.3 billion. The problem was the outlook:
- Fourth-quarter revenue of $15 billion to $16 billion, compared with the $17.08 billion analysts expected.
- Adjusted earnings of $0.25 a share, compared with a $0.44 consensus.
- Adjusted gross margin falling to 38%, from 44.1% in the third quarter.
Lip-Bu Tan, Intel’s chief executive, said customers “began signaling a PC slowdown based on the memory prices and availability,” according to Yahoo Finance. David Zinsner, the company’s chief financial officer, expects that weakness to last through at least the first half of next year, Investing.com reported.
Amazon fell 6.5% in premarket trading, according to Reuters, while Yahoo Finance put the drop at 7%. Yahoo Finance reported that the company’s free cash flow showed an outflow of more than $42 billion over the 12 months through September, compared with a previous record of about $23 billion in 2022. Its third-quarter spending on property and equipment reached about $77 billion, up from $35 billion a year earlier. Reuters said Amazon also signaled another increase in capital spending next year.
Why it matters
Together, Amazon and Intel were set to wipe out about $300 billion in market value, Reuters reported, and the Nasdaq 100 was on track to lose roughly $1 trillion, on top of close to $1.4 trillion already lost this month.
The pressure spread across the sector. Reuters said Nvidia was down 3.2%, AMD 8.3%, Dell 11.8% and HP 9.5%. Reddit, the social media platform, fell 21.7% after its chief executive, Steve Huffman, warned that daily active unique visitors could decline by a low double-digit percentage in the fourth quarter.
“It’s more of a rotation out of an extremely popular technology trade and into safer havens,” Art Hogan, chief market strategist at B. Riley Wealth, told Reuters.
The week’s other big technology reports offered a mixed picture. According to Reuters, Meta reported cash burn in the September quarter, while Microsoft delivered a large cash-flow beat but also raised $25 billion through a debt sale.
Background
Friday’s moves followed a lopsided session on Thursday, Oct. 29. Reuters reported that the Nasdaq Composite closed down 365.13 points, or 1.37%, at 26,184.72, the S&P 500 lost 23.59 points, or 0.30%, to 7,720.39, and the Dow Jones Industrial Average slipped 132.54 points, or 0.25%, to 52,342.56.
Alphabet, the parent of Google, sank 12.6% after a revenue miss and faster AI-related cash burn, in what Reuters described as a record selloff. ServiceNow and Fortinet each dropped more than 20% after their results.
Beneath the headline indexes, many stocks rose. The small-cap Russell 2000 gained 1.0%, and advancing issues outnumbered decliners by 1.95-to-1 on the New York Stock Exchange. “There’s plenty of other places to go with your money outside of the AI trade,” Ross Mayfield, investment strategy analyst at Baird, told Reuters.
Earnings overall remain strong. Reuters, citing LSEG data, said 81% of the 253 S&P 500 companies that had reported third-quarter results by Thursday beat expectations, with aggregate profit growth forecast at 31.0%.
What comes next
Investors are also weighing oil and inflation. Yahoo Finance reported Brent crude at about $113 to $115 a barrel in separate updates, up 12% in October, as traders cited signs the US may resume strikes on Iran. Energy shares gained, with Exxon Mobil up 2% and Chevron up 1.6% before the open, according to Reuters.
Thursday’s data showed the Federal Reserve’s preferred inflation gauge, the personal consumption expenditures price index, rising to 3.6% from 3.4% a year earlier. Reuters said markets now expect more than 50 basis points of Fed rate increases by mid-2027, according to LSEG data, even though the central bank held rates steady on Wednesday. Treasury yields fell Friday as investors sought safety, Yahoo Finance reported.
Crypto-linked shares were under separate pressure after the hack of the Binance exchange. Yahoo Finance said bitcoin dropped to around $77,000 and that Circle, Coinbase, Robinhood and Strategy were each down more than 6% before the open.
Reuters said the Nasdaq was set to end a two-month winning streak in October, while nine of the 11 S&P 500 sectors were on course for monthly gains. The exceptions were technology and communication services, with the latter headed for its worst month since April 2022.
