Tech Stock Sell-Off Intensifies, Wall Street Sees Steepest Drop Since June

Wall Street Faces Major Decline as Tech Stock Sell-Off Accelerates

The ongoing sell-off for tech stocks deepened on Friday, sending major U.S. markets into sharp decline and dragging Wall Street toward its worst day since June. Concerns are growing that Wall Street’s aggressive enthusiasm for artificial intelligence (AI) may have pushed tech stock prices to unsustainable levels, prompting widespread investor caution.

Indices Suffer Major Losses Amid Tech Weakness

By early afternoon on Friday, the S&P 500 had fallen by 1.8%, erasing its October gains despite having reached an all-time high earlier in the month. The Nasdaq composite dropped 3%, positioning it for its steepest single-day loss since June. The Dow Jones Industrial Average declined by 496 points, or 0.9%, underscoring the breadth of the stock sell off across markets.

Intel, Amazon, and Alphabet Highlight Tech Sector Struggles

Intel led the tech rout, with its shares plunging 30.1% and approaching their worst day since 1974. Despite reporting a quarterly profit that exceeded analysts’ expectations, Intel issued a disappointing forecast for year-end profits, citing ongoing pressure in the personal-computer industry.

Amazon's stock dropped 2.3% after reporting summer profits that failed to meet analyst expectations. Particularly concerning was Amazon's revelation that it burned through $42.4 billion in free cash flow over the past year, driven in large part by $94.8 billion spent on property, equipment, and major investments in AI technologies.

A day earlier, Alphabet experienced its worst day on record as the stock tumbled more than 12%, largely due to sharply higher cash expenditures on AI. Investors have grown uneasy about whether these massive ai investments can deliver the returns needed to justify their scale.

AI Frenzy Shifts to Investor Skepticism

The initial enthusiasm for companies fueling the AI boom—especially those building AI data centers and manufacturing computer chips—has given way to concerns over high interest rates and whether the rapid build-out can be sustained. "We’re moving out of the hopes and dreams phase of the AI trade and into the ‘show me’ phase," said Joe Tigay, portfolio manager at Equity Armor Investments.

Nvidia, a leading chipmaker at the heart of the AI surge, saw its shares fall 4.7%, making it the largest single drag on the S&P 500 on Friday.

Cryptocurrency Market Hit by Security Concerns

The cryptocurrency market also came under pressure after a significant hack on Binance, the world’s largest crypto exchange, impacted over $6 billion in digital assets. Bitcoin prices dropped toward $77,000, down from highs above $86,000 earlier in the month. A U.S.-based blockchain intelligence firm attributed the attack to a North Korean hacking unit.

Coinbase Global’s stock fell 12.9% despite reporting better-than-expected quarterly results. Strategy, which owns roughly 4% of all bitcoin, slipped 6% and disclosed the upcoming resignation of its chief financial officer.

Mainstream Companies and Global Markets Respond

Outside the technology sector, several mainstream firms posted stronger-than-expected profits, offering some resilience amid the broader market downturn. ExxonMobil rose 1.8% and Chevron added 1.6%, both buoyed by solid earnings. Mondelez International and Colgate-Palmolive saw gains of 3.7% and 3.5%, respectively, after reporting robust revenue and profit growth.

Meanwhile, treasury yields slipped as investors sought safer government securities; the yield on the 10-year Treasury dropped to 4.94%. Oil prices, often linked with inflation expectations, rose 2.4% to $113.50 for Brent crude.

Internationally, markets were mixed: South Korea’s Kospi fell 3.5% amid AI-related concerns in its tech-heavy market, Japan’s Nikkei 225 lost 2.1% following a central bank decision to keep rates unchanged, while Hong Kong’s Hang Seng index climbed 1.5%.

Source: wtop.com.