AI stock selloffs fuel fears Big Tech’s best quarters are over

Many of the top technology stocks, which seemed almost unstoppable for months, got hammered this week as fears grew that massive spending on artificial intelligence won’t pay off anytime soon.

Some investors have expressed concerns that the AI rally has inflated some shares too much. Hundreds of billions of dollars are being spent on data centers and the research to build and test the powerful large language models behind AI, but it remains uncertain whether future profits will justify the investment.

Companies have yet to prove they have enough customers for the technology and, at the same time, have expressed the need to slow down the pace of development to ensure it can be safely managed.

The latest quarterly results confirmed many concerns: While high AI profits are still far off, much more spending is still required. Many investors have taken this moment to sell some of their tech shares as they wait for a clearer outlook on profits and spending.

Meanwhile, many tech companies are realizing that AI could shift customers away from other parts of their business that are more profitable.

“The disruption caused by AI is on full display during tech earnings and the uncertainty around which names and sectors will be the disruptors vs the disrupted,” said Dan Ives, partner and senior managing director at Yorkville Ives, in a note Friday.

The Nasdaq 100 index plunged roughly 4%, wiping out more than $1 trillion in value. The S&P 500 dropped more than 2% on Friday afternoon.

The market is “a lot more sensitive than it might normally be,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management, adding that investors would rather sell first and ask questions later rather than get stuck nursing further losses.

Strategists from Wells Fargo to Franklin Templeton were among those in recent weeks predicting the S&P 500 corporate earnings expansion would decelerate as higher interest rates, tariff pressures and elevated oil prices weigh on results.

Roughly a third of the way through the reporting season, their forecasts have proved on point: Earnings growth has slipped to roughly 26% — still elevated compared with historical norms but below the 32% growth rate seen in the second quarter, the data show.

Tech companies are spending heavily on data centers and other infrastructure to power AI products that could change how people work and socialize.

AI assistants can help automate tasks, prompting companies to rethink the sizes of their global workforce.

Still, the latest corporate results confirmed pessimists’ concerns that the AI boom is going to continue to weigh on profits, at least during this intense building period, even as it helps determine new tech leaders and losers.

Intel had one of its worst days on the market. The Santa Clara-based chipmaker saw its stock plunge more than 30% Friday to roughly $62 per share after it reported a weaker fourth-quarter outlook and a slowdown in personal computer sales.

Intel’s Chief Executive Lip-Bu Tan, who took the helm in March 2025, has faced major hurdles as he has tried to turn around the company.

On Thursday, Intel projected adjusted earnings of 25 cents a share in the fourth quarter on revenue between $15 billion and $16 billion. That fell below estimates of $17 billion in fourth-quarter revenue and adjusted earnings of 45 cents a share.

The weaker outlook is tied to an explosion that hit an Intel factory in Israel in October that killed two workers. Intel is expected to lose about $600 million in revenue because of that explosion.

The company and its customers are also dealing with rising chip prices, triggered, in part, by the AI spending boom. That is hurting demand for personal computers which use its chips.

“We expect the current environment to persist until memory availability and prices begin to normalize,” Tan said Thursday during a call with analysts.

Amazon, Google’s parent company Alphabet, ServiceNow and Meta all saw their share prices drop after reporting quarterly earnings.

Amazon, which released its quarterly earnings Thursday that missed Wall Street’s expectations, also reported a negative free cash flow of $42 billion as it spends heavily on AI.

Amazon Chief Executive Andy Jassy told analysts during its earnings call Thursday that the company expects “to spend meaningfully more in 2027 with a clear line of sight to attractive financial returns.”

Santa Clara-based ServiceNow also had a brutal week. On Thursday, its stock plunged 27% after the enterprise software company reported weaker-than-expected third-quarter results.

Microsoft, which announced voluntary buyouts this week, saw its stock jump after announcing financial results that beat Wall Street’s expectations. But by Friday, its stock closed down more than 1%.

The post-earnings plunges are reinforcing fears that the best quarters, particularly for AI-linked companies, are in the rear-view mirror.

“If you’ve got 50% of the market in those two sectors, people want extra; they want more validation that this trade is still intact,” said Keith Lerner, chief investment officer and chief market strategist at Truist Advisory Services. A slowdown in growth challenges the narrative, he said.

Indeed, the tech and communications sectors are the only two in the red this month, while every other corner of the market has advanced.

Kimberly Forrest, chief investment officer at Bokeh Capital Partners, said investors are “trimming some of their excessive gains” in tech to pick up cheaper stocks elsewhere, rather than completely selling out of an equities market that is still poised to grow earnings, even if it’s at a slower rate.

To be sure, many analysts remain optimistic about technology’s future.

“This requires patience and it’s easy to sell the tech winners during these times of turmoil. Valuations across the tech franchise are not expensive with growth prospects that are likely stunning into the next few years,” Ives said in the note.

Bloomberg contributed to this report.