US tech stocks experienced a second consecutive day of sharp declines on Friday, driven by growing concerns over the massive investments in artificial intelligence (AI). Intel shares plummeted by 28%, while Alphabet, the parent company of Google, saw its stock drop another 1.4% after a 12% fall the previous day. Other major tech firms, including Amazon and Reddit, also faced declines, contributing to the Nasdaq's worst monthly performance since March 2025.
The downturn comes as tech companies ramp up their AI spending, with Meta, Alphabet, Oracle, Amazon, and Microsoft collectively committing to invest $800bn in 2026. Alphabet alone expects to spend up to $205bn this year on AI-related investments. Despite these heavy investments, earnings have not met analysts' expectations, fueling fears of an AI bubble. Intel, for instance, reported weaker-than-expected revenue forecasts and announced plans to increase AI spending despite a slowdown in PC demand.
Amazon also revealed that its spending had surged six-fold over three months, with a total commitment of $220bn this year. Reddit's stock tumbled by 29% after reporting weaker user figures and warning about the impact of Google's AI-driven search on referral traffic. Roblox shares fell by 18% due to declining daily active user numbers. Analysts noted that the market reaction was largely driven by the performance of major tech players like Amazon and Google, which are facing significant growing pains as they pursue AI development.
Investors have become increasingly critical, punishing any signs of disappointment in third-quarter earnings. Kathleen Brookes, research director at XTB, observed that the AI trade has seen many ups and downs recently. While stock market values for many tech companies remain higher than a year ago, the recent declines have raised questions about the sustainability of AI investments. November is typically a strong month for stocks, but if AI stocks continue to struggle, it could signal the end of the AI trade's peak.