Tech stock sell-off intensifies, threatening October gains for Wall Street

The Nasdaq composite is experiencing its worst trading day since June, falling by three per cent as of 12:55 p.m. Eastern time, largely due to the decline in technology shares. The Dow Jones Industrial Average has dropped 496 points, representing a 0.9 per cent decrease.

Intel’s stock has been a major contributor to the downward pressure, plummeting 30.1 per cent and facing its worst day since 1974. The company’s weaker-than-expected profit forecast for the final three months of the year, attributed to ongoing pressure on the personal-computer industry, weighed heavily on investor sentiment, despite reporting a stronger profit for the most recent quarter. CEO Lip-Bu Tan highlighted the challenges.

Amazon’s stock also declined, falling 2.3 per cent after reporting a weaker profit for the summer than anticipated. Adding to investor concerns, the company reported burning through $42.4 billion in cash over the past 12 months, with $94.8 billion spent on property and equipment, primarily related to AI investments.

This follows a substantial drop of over 12 per cent for Alphabet’s stock the previous day, its worst performance on record, which significantly contributed to the S&P 500’s decline. Alphabet, the parent company of Google and YouTube, cited similar substantial investments in AI as the reason for the cash burn.

Analysts are questioning whether these massive investments will ultimately generate sufficient profit and productivity to justify the expenditure. The price of Nvidia, a key beneficiary of the AI boom, has fallen 4.7 per cent, impacting the S&P 500 more than even Intel’s decline.

Beyond the tech sector, the cryptocurrency market has also been affected, with prices falling after a major hack at Binance, the world’s largest crypto exchange. Bitcoin’s price has dropped to around $77,000 from over $86,000 earlier this month. A U.S.-based blockchain intelligence firm attributes the attack, which impacted over $6 billion in crypto assets, to a North Korean unit.

Coinbase Global fell 12.9 per cent despite reporting stronger-than-expected results, while Strategy, which holds approximately 4 per cent of Bitcoin’s total supply, saw a 6 per cent decrease. The company’s CFO will be resigning next week for personal reasons.

Other companies reported stronger-than-expected profits, helping to offset some of the tech-driven losses. ExxonMobil and Chevron climbed 1.8 per cent and 1.6 per cent, respectively, while Mondelez International and Colgate-Palmolive rose 3.7 per cent and 3.5 per cent, respectively.

Investor expectations for continued strong U.S. corporate profits remain high, despite global concerns about inflation and fuel prices. This optimism fueled the S&P 500’s record high earlier this month. Treasury yields have eased as investors seek safer assets, with the 10-year Treasury yield falling to 4.94 per cent. Oil prices rose 2.4 per cent to $113.50 per barrel.

Overseas markets experienced mixed results, with European indexes mostly lower and Asian markets showing sharper fluctuations.