A selloff in technology shares spread from Wall Street to Asia as investors reacted to disappointing earnings from some of the biggest names in tech. It revived worries that spending on artificial intelligence is running ahead of the profits it generates.
Alphabet’s record drop
On Thursday, Alphabet fell 12.6% in the biggest one-day decline in its history, wiping roughly $500 billion from its market value. The Google parent missed analyst forecasts for revenue and earnings, burned cash and said capital spending will rise significantly in 2027. Search revenue growth of 12% fell short of the 15% analysts had expected, adding to concerns that AI chatbots are affecting Google’s core business.
CEO Sundar Pichai told analysts the company’s spending is part of a long-range planning process rather than a short-term allocation. The market was not reassured.
The S&P 500 fell 0.30% to 7,720.39, ending a three-day winning streak. The Nasdaq Composite lost 1.38% to 26,184.72. The Dow Jones Industrial Average slipped 0.25% to 52,342.56.
Beneath the surface, a different picture
The headline numbers hid a broad rotation. Most S&P 500 stocks rose, and the equal-weight version of the index gained 1.2%. Health care, real estate and consumer staples led. The small-cap Russell 2000 climbed about 1% to a three-week high. Software and chip stocks, meanwhile, slumped.
Economic data was in line with expectations. The personal consumption expenditures price index, the Fed’s preferred inflation gauge, rose 0.5% in September, the biggest monthly gain since March, and 3.6% from a year earlier. Core prices excluding food and energy rose 0.3% for the month and 3.1% for the year. Economic growth beat forecasts. Treasury yields eased as investors sought safety.
After-hours blows
Two more reports landed after the closing bell. Amazon reported accelerating cloud growth but missed profit and revenue estimates, and its shares fell more than 6% in after-hours trading. Intel’s third-quarter results beat on adjusted earnings, but the chipmaker forecast fourth-quarter revenue of $15 billion to $16 billion against analysts’ expectations of about $17 billion. It also guided for a sharp fall in gross margin to 38%. Shares dropped between 17% and 23% in extended trading from a close of $92.07.
Asia takes the hit
The effect spread across Asia on Friday. South Korea’s Kospi fell 4.9%, triggering a halt to program trading. The index had surged about 7% on Wednesday on record profit from SK Hynix. Japan’s Nikkei 225 closed 2.1% lower at 63,290.11, after earlier falling more than 2.5%. The Bank of Japan’s decision to leave interest rates at 1.25% offered little support.
The picture in Hong Kong was different. The Hang Seng rose 1.4%.
Beyond technology, other headlines added to the unease. Binance, the world’s largest crypto exchange, suspended withdrawals after a hack involving about $6.3 billion, sending Bitcoin below $77,000. Oil prices rose after a ship fire near the Strait of Hormuz.
What to watch
With the S&P 500 still up about 12.8% for the year, investors have a lot of gains to protect. The week’s earnings have split technology into two camps: companies showing growth that comes with healthy cash flow, such as Microsoft, and those where spending is outrunning it.
Traders will look to Friday’s US session for signs of whether the selloff continues. Futures were pointing lower in Asian hours. Markets are also watching the Fed, which held rates on Wednesday but has two members who want to raise them, and an expected rate decision from the Reserve Bank of Australia on November 3.
Market data is for information only and is not investment advice.
