Nasdaq falls 2.9% as Intel drops 28.6% and concern grows over returns on AI investment
Key Facts
U.S. stocks fell on October 30 as selling in technology shares intensified. The S&P 500 dropped 1.8%, the Nasdaq Composite 2.9% and the Dow Jones 1.1%, according to the Associated Press. The S&P 500’s decline was its worst since June, while Intel led market losses with a 28.6% drop in its shares, the biggest one-day fall since 1974. The pressure came despite Intel reporting quarterly profit above analysts’ estimates, as its fourth-quarter guidance fell short of their expectations. Amazon’s results presented a different picture: strong growth in its cloud computing business alongside high capital spending and negative free cash flow. The developments brought investors’ question back into focus: can AI investments generate profits and productivity that justify the scale of spending?
Intel’s third-quarter revenue rose 21% to $16.51 billion, in line with estimates, while adjusted profit was 52 cents a share against expectations of 40 cents, Reuters reported via Investing.com. But the company forecast fourth-quarter revenue of $15 billion to $16 billion, below analysts’ average estimate of $17.07 billion. It projected adjusted profit of 25 cents a share for the same quarter, compared with expectations of 43 cents. The market reaction therefore focused on the outlook, despite the quarter’s earnings topping estimates. The Associated Press said the lower-than-expected profit forecast drove the stock to its worst one-day performance since 1974.
Intel’s personal-computer chip sales fell 5% to $8.10 billion in the third quarter, and the company forecast that revenue from the business would decline by around the mid-20s percentage in the fourth quarter, or more than 20%, Reuters reported via Investing.com. Chief Financial Officer David Zinsner said the PC market slowdown could continue at least through the first half of next year. He also said the company did not expect positive cash flow this year. The outlook places weak PC demand among the factors weighing on Intel, alongside the expected fourth-quarter earnings shortfall. The decline spread to U.S. semiconductor stocks, with AMD, Arm, Qualcomm, Nvidia, Broadcom and Micron shares falling between 4% and 12% on October 30.
Amazon Web Services revenue, by contrast, rose 39% to $46 billion in the third quarter, following a 37% increase in the second quarter, Reuters reported via Investing.com. The unit’s growth exceeded analysts’ estimate of 38.2%, and Amazon said AWS revenue grew more than 39% year over year in the third quarter. The company said it expected growth of more than 40% in both 2027 and 2028. But strong cloud sales coincided with negative free cash flow of $42.4 billion in the 12 months ended September 30. Amazon attributed that mainly to a year-over-year increase of $94.8 billion in purchases of property and equipment, most of which were investments in AI technologies, according to the Associated Press.
On guidance, Amazon forecast fourth-quarter revenue of $240 billion to $247 billion, compared with analysts’ average estimate of $244.51 billion, Reuters reported via Investing.com. The period includes the holiday shopping season, putting the forecast under scrutiny alongside AWS growth and infrastructure spending. A portfolio manager at Equity Armor Investments pointed to a shift in market sentiment, saying: "We are moving from the hopes-and-dreams phase of AI trading to: show us the results." In this climate, strong AWS growth alone was not enough to dispel concerns about the amount of money directed toward AI and whether it would translate into returns. As stocks fell, the yield on 10-year U.S. Treasuries declined to 4.93% from 4.98% late Thursday, as investors bought bonds in search of safer assets, according to the Associated Press.