By STAN CHOE AP Business Writer
NEW YORK (AP) — 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 1.8% for its worst day since June, and it closed out a third straight losing week. The weakness for technology stocks dragged the Nasdaq composite down a market-leading 2.9%, while the Dow Jones Industrial Average dropped 572 points, or 1.1%.
The U.S. stock market remains only 3.1% below its all-time high, which has boosted the value of workers’ 401(k) accounts, but it’s become increasingly shaky as Tuesday’s midterm elections in the United States approach. Worries about AI in general have already become a concern for voters across political parties, and President Donald Trump has historically used the stock market’s performance as a measure of his own success.
Intel’s stock led the way lower and plunged 28.6% 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 fell 1.4% 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 of cash over the prior 12 months, according to a measure called free cash flow. It spent $94.8 billion on property and equipment, primarily through investments in artificial-intelligence technology.
A day earlier, Alphabet’s stock dropped more than 12% to its worst day on record and dragged the S&P 500 down 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 the 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 centers have come under pressure on concerns that high interest rates may slow the further build out of data centers.
“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% 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 tumbled following a hack on the world’s biggest crypto exchange. The price of bitcoin fell below $77,000 from more than $86,000 earlier this month, and a U.S.-based blockchain intelligence firm said a North Korean unit was likely behind the attack that impacted more than $6 billion worth of crypto at Binance.
Coinbase Global fell 10.6% even though it reported stronger results for the latest quarter than analysts expected. Strategy, which says it owns about 4% of the total supply of bitcoin, fell 7.8%. It also reported a stronger profit for the latest quarter than analysts expected, while saying its chief financial officer will resign next week for personal reasons.
Outside of tech, stocks were more resilient as many rallied after reporting stronger profits for the summer than analysts expected. Nearly as many stocks rose within the S&P 500 index as fell.
ExxonMobil climbed 2.2%, and Chevron added 1.8% after the oil giants reported stronger profit for the summer than analysts expected.
Mondelez International rose 3.9% after the company behind Oreo cookies and Ritz crackers reported stronger-than-expected growth.
Colgate-Palmolive climbed 2.3% after higher prices for its products around much of the world helped it deliver better revenue and profit than analysts expected.
Expectations are high for U.S. companies’ ability to make bigger profits, even though people around the world are feeling discouraged about high inflation and high fuel prices. Such expectations are what drove the S&P 500 to its record earlier this month.
All told, the S&P 500 fell 140.32 points to 7,580.07. The Dow Jones Industrial Average dropped 572.25 to 51,770.31, and the Nasdaq composite sank 747.73 to 25,437.00.
In the bond market, Treasury yields eased in a signal that investors were buying U.S. government bonds in search of something safer to own. The yield on the 10-year Treasury fell to 4.93% from 4.98% late Thursday and from more than 5.30% earlier in the month.
Treasury yields fell even though oil prices bounced higher, something that usually drives yields upward because it worsens inflation. The price for a barrel of Brent crude oil rose 2.4% to $113.43. It’s near the high end of its range since the war with Iran sent oil prices and inflation higher.
In stock markets abroad, indexes were mixed in Europe following sharper swings in Asia.
South Korea’s Kospi dropped 3.5% as worries about AI hit its tech-heavy market, while the Hang Seng in Hong Kong climbed 1.5%.
Japan’s Nikkei 225 fell 2.1% after the Bank of Japan decided to keep interest rates steady, echoing moves made earlier in the week by the Federal Reserve and the European Central Bank.
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AP Business Writers Yuri Kageyama and Michelle Chapman contributed to this report.