Tech stocks slide as AI investment costs weigh on wall street

Around 1:55 PM GMT, the tech-heavy Nasdaq plunged 2.19%, the broader S&P 500 fell 1.20%, and the Dow Jones, less exposed to the tech sector, declined 0.39%.

Amazon shares dropped 3.03% after the company reported revenue and profit for the third quarter that fell short of expectations. The company’s AI-related spending exceeded its gains.

From July to September, Amazon generated $201.9 billion in revenue, a 12% increase year-over-year, with a net profit of $20.7 billion, a 2% decrease.

The escalating costs associated with AI development are impacting major corporations. Amazon invested $77.3 billion in equipment during the third quarter.

For the year, the Seattle-based group maintains its investment target of approximately $220 billion and plans to spend “significantly more” in 2027, according to CEO Andy Jassy.

Consequently, Amazon’s cash flow has turned negative, reaching -$42.4 billion over the past twelve months, indicating that its operational income is no longer sufficient to fund its investments.

“The cost of Amazon’s ambitions in AI is not yet justified by its sales,” stated Kathleen Brooks, director of research at XTB.

The impact extends to suppliers as well: Intel plummeted 29.21% after releasing disappointing forecasts due to a memory shortage driven by AI, which is pushing prices sharply higher. The chipmaker anticipates revenue of $15 to $16 billion in the fourth quarter, significantly below expectations.

In the cryptocurrency market, Bitcoin fell 2.63% to $76,719.73. Binance, the world’s largest cryptocurrency exchange platform, suffered a cyberattack on Thursday, estimated to have resulted in losses of $6.3 billion.

Oil giants ExxonMobil (+2.31%) and Chevron (+1.64%) bucked the downward trend, benefiting from soaring refining margins linked to wars in the Middle East and Ukraine. ExxonMobil’s quarterly profit more than doubled to $15.4 billion, while Chevron’s reached $9.9 billion, compared to $3.5 billion a year earlier.

European markets were divided. In Paris, the index was stable (+0.07%), London gained 0.16%, while Frankfurt lost 0.94% and Milan 0.95%.

Semiconductor-related stocks remained under pressure. In Paris, Soitec fell 8.53% and STMicroelectronics dropped 3.98%. The pharmaceutical group Sanofi (6.46%) limited losses after raising its annual forecasts.

In Frankfurt, Bayer rose 4.13%. Its Monsanto subsidiary won a lawsuit related to its Roundup herbicide, the first case decided since a favorable Supreme Court ruling in June.

Brent crude oil rose 2.08% to $117.27 per barrel, and U.S. WTI increased 2.03% to $104.07, supported by tensions in the Strait of Hormuz, where Iran claimed four oil tankers caught fire after hitting mines. Prices are also influenced by fears of a new U.S. offensive against Iran following Tuesday’s midterm elections.