The Nasdaq Composite plunged 610 points, or 2.3%, shortly after markets opened Friday as underwhelming earnings from Alphabet, Amazon and Intel intensified concerns over the outlook for artificial intelligence.
Intel shares fell nearly 29% in early trading. Alphabet remained under pressure a day after its Class A stock dropped more than 12%—the company’s steepest one-day decline since Google went public in 2004. The sell-off wiped out about $500 billion in Alphabet’s market capitalization.
“This has been one of the worst tech earnings seasons in memory, with underwhelming results from a slew of very prominent companies,” Adam Crisafulli, head of Vital Knowledge, wrote in a research note.
The broader market also opened lower, with the S&P 500 down 1.2% and the Dow Jones Industrial Average slipping 0.4%.
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The disappointing technology results have revived doubts about whether the enormous sums being poured into AI will deliver the returns Wall Street is anticipating. Investors are also scrutinizing the debt companies are assuming to fund data-center construction and questioning whether those spending plans can be maintained.
The stock market’s recent record run has been fueled in large part by expectations for continued, explosive AI growth. That confidence is now facing a serious test. In a report released earlier this week, Ulrike Hoffmann-Burchardi, UBS’ CIO Americas and global head of equities for its Chief Investment Office, urged clients to “diversify beyond AI.”
“While we maintain a constructive outlook on the structural growth of the AI theme, high expectations and potentially wide differences in company outcomes underscore the risks of single-stock concentration,” she said. “We think investors should ensure their equity portfolios are broadly diversified.”