US stocks suffered a sharp decline on Friday, with the Nasdaq dropping to a three-month low amid growing concerns over the financial sustainability of AI-related investments. The selloff was triggered by disappointing earnings reports from Intel and Amazon, which raised doubts about the return on investment for companies heavily spending on artificial intelligence. The Nasdaq Composite fell 3.37%, while the S&P 500 and Dow Jones Industrial Average lost 2.08% and 1.08%, respectively.
The tech sector was hit hardest, with chipmakers like Nvidia and AMD tumbling 5.3% and 12.1%. Server manufacturers Dell and HP also saw significant drops, losing 12.5% and 10.8%. Intel and Amazon were on track to erase nearly $200 billion in combined market value if losses held, contributing to a potential $1 trillion decline in the Nasdaq-100.
Oliver Pursche, senior vice president at Wealthspire Advisors, noted that the market's focus this week has been on the future of AI and whether companies will achieve a positive return on their investments. He observed that firms meeting high expectations are performing well, while those falling short are being punished.
Cryptocurrency-related firms also faced a downturn, with Coinbase, Strategy, and Robinhood dropping between 8.8% and 13.6% following reports of a $6.3 billion hack on Binance. Meanwhile, oil supermajors Exxon Mobil and Chevron bucked the trend, gaining 1.7% and 1.4% respectively, benefiting from energy supply disruptions due to geopolitical conflicts.