US tech stocks see sharp falls over AI cost concerns
US technology shares fell sharply as investors questioned whether the rising cost of building AI systems will deliver enough returns. Intel’s warning of a weaker computer market, despite increased AI spending, deepened the sell-off, while Amazon and Alphabet also came under pressure.
The Nasdaq opened down 2.5%, its lowest level in more than two months. Intel shares fell as much as 30%, putting the company on track to lose more than $130bn in value; finance chief David Zinsner said it did not expect positive cash flow this year and forecast a PC slowdown through at least the first half of next year. Amazon’s reported earnings missed expectations, while Alphabet lost more than $500bn in value on Thursday after saying its AI summaries were affecting core search advertising revenue.
In short
- AI spending worries weighed on technology shares.
- Intel fell as much as 30%.
- The Nasdaq opened down 2.5%.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Investors are right to question whether enormous AI spending can earn a durable return: Intel’s cash-flow outlook and weaker PC demand show that investment does not guarantee near-term growth, while Alphabet’s comments suggest AI features may disrupt established revenue. A sharp repricing can reflect prudent scrutiny of costs and business models, helping direct capital towards companies that can demonstrate sustainable returns.
The case against
Large technology investments often take time to produce revenue, so judging them mainly by near-term cash flow risks overlooking future productivity gains and new products. The reported falls may also reflect disappointing company-specific results and heightened expectations, rather than evidence that AI spending as a whole will fail to pay off.
Explained simply
AI systems such as chatbots and automated search tools require large amounts of computing power, data centres and specialist chips. Technology firms are spending heavily to build these systems, while investors are weighing whether the resulting services will generate enough income to justify the costs.
Intel makes processors used in personal computers and data centres; Amazon and Alphabet, which owns Google, run major cloud and online advertising businesses. Their results can influence views of the wider technology sector because they depend on both computing demand and digital services.
The issue matters because these companies are among the largest on US stock markets, so changes in their share prices can affect major indices such as the Nasdaq. It also raises questions about how quickly AI investment may change existing businesses, including computer sales and search advertising.
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