Technology stocks on Wall Street faced a sharp sell-off this week as investors grew wary of the massive investments in artificial intelligence (AI) infrastructure. Concerns mounted that these expenditures may not quickly translate into higher profits, raising doubts about elevated valuations. While earnings reports from major tech companies showed growth in cloud computing and AI-related businesses, investors focused on the rising costs of data centers, advanced chips, and computing infrastructure.
The Nasdaq 100 Index saw its worst monthly performance since March 2025, declining 6.7% in October. Investors are increasingly scrutinizing the gap between capital expenditures and cash generated by tech companies. Major cloud and technology firms, known as hyperscalers, are spending billions on AI infrastructure, but demand for cloud computing alone is not reassuring investors about sustainable revenue growth and improved cash flows.
Alphabet Inc., Google's parent company, experienced a historic 13% single-day decline after its earnings report revealed disappointing sales growth in its core search business and two consecutive quarters of negative free cash flow. The company spent over $50 billion on infrastructure in the latest quarter. Amazon.com Inc. also faced pressure after reporting higher negative free cash flow than expected, attributed to increased capital expenditure and slower e-commerce growth. Amazon shares fell 5.6% over two sessions, their worst performance since July.
Meta Platforms Inc. saw its shares drop approximately 12% since its October 21 results revealed a substantial increase in capital expenditure plans. Intel Corp. added to the negative sentiment after its profit forecast fell short of expectations, with shares plunging nearly 29% on Friday. Chinese technology stocks also faced pressure, with the STAR 50 Index declining 24% over the past month and 40% from its June peak.