The Nasdaq index dropped to a nearly three-month low amid mounting investor concerns over artificial intelligence infrastructure spending. According to Reuters, the catalyst for heightened anxiety was Amazon's plans to increase capital expenditures and Intel's warning of cash outflow by the end of the year. The market responded with a sharp sell-off in the technology and semiconductor segments, and the total market capitalization losses of major companies for October could exceed two trillion dollars.
Anxiety Over AI Infrastructure
The central factor pressing down on stock quotes was expectations for capital spending on AI infrastructure development. Investors are increasingly critical of the scale of tech giants' investments in data centers and computing power, fearing that the return on these costs will be lower than priced into shares. It was the combination of Amazon and Intel warnings about rising spending and cash burn that triggered the correction, which affected not only individual company stocks but the entire semiconductor sector.
Amazon: Rising CapEx and Partial Recovery
Amazon shares fell 2% following the release of its third-quarter financial results. The company warned of further increases in capital expenditures next year, despite already significant investments in AI infrastructure development. However, during trading, Amazon shares recovered a significant portion of the pre-market decline, indicating support from buyers even amidst the negative spending signal.
Intel: Record Drop and Cash Burn Warning
A more severe decline was demonstrated by Intel shares, which lost over 30%. If the drop holds through the end of trading, it will be the largest single-day decline in the company's history. The manufacturer warned that by the end of the year it will be spending more cash than it generates. Among the reasons cited are weak personal computer demand, manufacturing difficulties, and significant investments in expanding production capacity.
Semiconductor Sell-Off and Capitalization Losses
The slump in Intel shares sparked a sell-off in other semiconductor industry papers. Nvidia shares dropped 3%, and AMD fell 9.3%. The semiconductor sector index declined by 5.7%, while server equipment makers Dell and HP lost about 9% each. Collectively, the drop in value of Amazon and Intel shares could have reduced their combined market capitalization by approximately $200 billion. Meanwhile, the Nasdaq-100 risked losing just over $1 trillion, and the total capitalization decline of companies in the index for October could exceed $2 trillion.
Analyst Views: Rotation, Not a Massive Revaluation
B. Riley Wealth Chief Market Strategist Art Hogan noted that investor reaction largely depends on what expectations are already priced into stock values. According to him, for noticeable investor disappointment in the case of Alphabet, Amazon, and Intel, a relatively small deviation from expected results is enough. At the same time, he does not believe a massive market revaluation is taking place: rather, a rotation is observed where investors are moving away from extremely popular tech assets into safer instruments.
S&P 500: Tech Sector vs. Consumer and Healthcare
As for the S&P 500, the technology sector took the hardest hit, losing 3.4%. If the decline persists through the end of trading, it will mark the largest single-day drop since June 23. The telecommunication services and communication services sector fell 0.7% and approached its worst monthly performance since April 2022. Against this background, the S&P 500 consumer and healthcare sector indices rose 1.9% and 1.7% respectively, confirming capital reallocation from overheated tech assets into more defensive segments.
