Stock indices fell sharply on Friday as investors dumped tech shares over concerns that heavy artificial intelligence spending is burning through cash without delivering returns. The MSCI global index dropped 1.4%. The Nasdaq Composite fell 2.61% to 25,500.67, the S&P 500 declined 1.61% to 7,595.93, and the Dow Jones Industrial Average fell 0.73% to 51,957.95.
Intel shares plunged 28% after earnings revealed cash burn from AI investments and slowing PC demand expected to persist into next year. Amazon fell 1.9% following results showing heavy cash consumption for AI development. Alphabet extended losses from Thursday's 12.6% drop as massive AI spending turned its cash flow negative and its search business faced competition.
Gene Goldman, chief investment officer at Cetera, said the rout reflected concerns that "heavy cash burn and elevated capex" will not "justify the outlays" from AI spending.
Energy stocks bucked the weakness. Exxon Mobil shares rose 1.3% and Chevron gained 3% after posting strong profits driven by refining margins from supply disruptions caused by Ukrainian attacks on Russian refineries and the US-Israel war on Iran.
US Treasuries rallied as investors fled to safety. The 10-year yield fell 4.36 basis points to 4.945%, putting benchmark yields on track for their biggest monthly decline since late 2023. The 30-year yield fell to 5.3221% and the 2-year yield dropped 5.4 basis points to 4.602%.
The dollar weakened 0.2% against the yen to 157.37 after the Bank of Japan held rates steady but revised up its inflation forecast. The dollar index fell 0.03% to 101.85.
Oil prices extended their fourth straight monthly gain. US crude rose 2% to $104.09 a barrel and Brent crude gained 2.4% to $117.58 after a tanker attack in the Strait of Hormuz highlighted ongoing supply risks.
Gold fell 3% to a one-year low of $3,901.83 an ounce and silver dropped 5.9% to $49.27 as higher energy prices and inflation concerns strengthened expectations for sustained high US interest rates.