North American stocks sink, Wall Street suffers worst day since June amid
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A sell-off for tech stocks got even worse Friday on worries that Wall Street’s frenzy around artificial-intelligence technology sent prices too high.
The S&P 500 tumbled about 1.8 per cent Friday for its worst day since June. The weakness of technology stocks dragged the Nasdaq composite down a market-leading 2.9 per cent, while the Dow Jones Industrial Average dropped 1.1 per cent.
Canada’s main index, the S&P/TSX composite, bounced back from its afternoon drop of 2.3 per cent to close down 1.7 per cent.
Intel’s stock led the way lower and plunged 28.6 per cent for its worst drop since 1974. The chipmaker gave a forecast for profit in the final three months of this year that fell short of analysts’ expectations, as CEO Lip-Bu Tan said the personal-computer industry continues to feel pressure. The drop came even though Intel reported a stronger profit for the latest quarter than analysts expected.
Amazon sank 1.4 per cent after reporting a weaker profit for the summer than analysts expected. Potentially more concerning for investors was Amazon’s reporting that it burned through $42.4 billion US of cash over the prior 12 months, according to a measure called free cash flow. It spent $94.8 billion US on property and equipment, primarily through investments in artificial-intelligence technology.
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A day earlier, Alphabet’s stock dropped more than 12 per cent to its worst day on record and almost single-handedly dragged the S&P 500 lower after telling investors it burned through more cash during the summer than the spring. The company behind Google and YouTube cited similar, mammoth investments in AI.
Worries are rising about whether all those hundreds of billions of dollars will produce enough profit and productivity to make the investment worth it. At the same time, stocks of computer chip companies and other winners from the frenzy to build AI data centres have come under pressure on concerns that high interest rates may slow the further build out of data centres.
“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, in a note to investors.
A drop of 4.2 per cent for Nvidia, the chip company that became the poster child of the AI frenzy, was the heaviest force pulling the S&P 500 downward, outweighing even Intel.
In the cryptocurrency industry, meanwhile, stocks…
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