Nasdaq Falls 2.9% After Intel and Amazon Results Renew Concerns Over AI Spending

Key Facts

The Nasdaq Composite fell 2.9% in the October 30 session, its biggest daily loss since June 5, after results from Intel and Amazon brought concerns about AI spending and returns back into focus. The index lost 747.73 points to close at 25,437.00. The decline spread across the rest of the U.S. market: the S&P 500 fell 1.8% to 7,580.07, and the Dow Jones dropped 1.1%. Shares came under pressure as investment needed to develop AI technologies and data centers expands. The companies’ results highlighted the divergence between growing demand for cloud services and the cost of financing the infrastructure that supports it.

Intel was one of the biggest sources of pressure on the market, with its shares falling 28.6%, their steepest decline since 1974. The drop came after the company forecast earnings for the final three months of the year below analysts’ estimates, even though its latest-quarter earnings exceeded expectations. The divergence refocused investors on the company’s ability to turn demand for chips into financial results that beat forecasts. The decline was also deepened by the stock leading market losses in a session marked by broad selling in technology shares. Intel’s losses coincided with wider concern that the scale of AI-related spending may not guarantee a rapid return.

Amazon shares fell 1.4% after the company reported weaker-than-expected earnings, despite accelerating growth in its Amazon Web Services unit. The unit’s sales rose 39.3% to $46 billion in the quarter ended September 30, compared with growth of 37% in the previous quarter. But the company posted a free cash flow deficit of $42.4 billion over the previous twelve months, while spending on property and equipment reached $94.8 billion, most of it directed toward AI investments. The chief executive said the company expects to spend $220 billion in capital expenditure during the year, mostly to build data centers dedicated to these technologies. The figures put cloud growth alongside funding needs, showing why the question of investment returns has returned to the market.

Funding concerns extended to smaller cloud computing companies borrowing to meet large orders, according to Reuters. In that vein, Microsoft sold $25 billion in bonds on Thursday, October 29. The borrowing adds to debate over how to finance rapid infrastructure expansion as investors focus on cash spending alongside sales growth rates. Amazon’s cloud unit growth did not prevent its shares from falling, just as Intel’s better-than-expected latest-quarter results did not shield its stock from a decline after a weaker outlook for the coming period. Friday’s session showed that growth news alone was not enough to ease concerns about the cost of expansion.

The stock losses came in a week when the Federal Reserve held its target interest rate range at 3.75%–4% on October 28. Two members voted against the decision, preferring a quarter-percentage-point rate increase, for a 10–2 vote. The next day, the European Central Bank left its three key interest rates unchanged and said its decisions would continue to depend on its assessment of inflation and incoming data. In energy markets, the December Brent crude contract, which expired on Friday, rose 2.4% to $117.64 a barrel. This was the contract’s highest settlement since the end of April, amid concerns about a possible escalation in the Iran war and an attack on a tanker in the Strait of Hormuz.

The next U.S. data calendar includes the September Job Openings and Labor Turnover report, scheduled for release on November 3 at 10:00 a.m. Eastern time. The release coincides with U.S. midterm elections on the same day, during a week packed with jobs data and corporate earnings reports. Minutes of the Federal Open Market Committee meeting held on October 27 and 28 will also be published on November 18 at 2:00 p.m. The minutes will provide further detail on monetary policy deliberations after the decision to leave the interest rate range unchanged. These dates are near-term milestones for tracking the effects of labor data and policymakers’ positions on markets.