Silicon Valley faced a harsh wake-up call on Friday as tech stocks tumbled, pushing the Nasdaq down nearly 10% from its peak and nearing a technical correction. The selloff was triggered by a string of disappointing earnings reports from major tech firms. Intel suffered its worst single-day drop in over four decades, plunging 29% after its outlook fell short of expectations. The decline followed Alphabet’s record market plunge the previous day, which erased half-a-trillion dollars in market value.
Amazon also became the latest victim of a post-earnings selloff after revealing higher-than-expected capital spending and the slowest growth in its core e-commerce business in three years. As the central operations of America’s tech giants, advertising, consumer, and retail, show signs of slowing, investors are questioning whether the massive investments in artificial intelligence will deliver returns. Concerns are mounting that the long-feared AI bubble could burst under the weight of what some describe as the greatest misallocation of assets in history.
‘We’re moving out of the hopes and dreams phase of the AI trade and into the ‘show me’ phase,’ said Joe Tigay at Equity Armor Investments. This week, investors clearly did not like what they saw.