Wall Street’s long love affair with artificial intelligence hit a rough patch this week. US technology shares fell for a second straight day on Friday, October 30, as investors weighed the enormous sums Big Tech is pouring into AI against the cash those businesses are actually bringing in.
The tech-heavy Nasdaq closed almost 3% lower on Friday and ended October with its worst monthly performance since March 2025, according to the BBC. The sell-off followed a run of quarterly results from the largest US tech firms that showed spending racing ahead of returns.
The biggest moves
- Intel: down 28% on Friday, erasing more than $130 billion in market value
- Alphabet: fell 12% on Thursday, the steepest one-day drop in its history, then slipped another 1.4% on Friday
- Reddit: down 29% after weaker-than-expected user figures
- Roblox: down 18% as daily active users fell
- Chipmakers: Qualcomm lost 11%, Broadcom over 5% and Nvidia about 4%, according to TechCrunch
Google’s search dilemma
Alphabet’s slide was the most striking. The Google parent lost just over $500 billion in value in a single session, with its market capitalisation falling from about $3.97 trillion to $3.46 trillion, according to the BBC.
The headline numbers were not weak. Revenue grew 25% from a year earlier to $127.6 billion in the July-September quarter. The problem lay in search advertising, the business that roughly half of Google’s revenue depends on. That unit grew by 12%, the slowest rate in five quarters. Chief business officer Philipp Schindler acknowledged that Google’s conversational AI Mode was eating into income from ads shown beside traditional search results, even as he said he felt good about the product’s direction.
Meanwhile, Alphabet burned through $9.1 billion more cash than it generated during the quarter, the second straight period in the red, as capital spending hit $51.4 billion. Its investment bill for 2026 could reach $205 billion, almost all linked to AI, and the company has signalled that figure will climb again in 2027.
A wider cash squeeze
Alphabet was not alone. Over the last 12 months Amazon’s free cash flow came to minus $42.4 billion, a sharp swing from a surplus of $14.8 billion a year before, and said it plans to spend $220 billion this year on data centres, chips and network equipment. Chief executive Andy Jassy defended the strategy, telling analysts it “would be more convenient” if the investment could be spread over decades, but “that’s not the world we live in”.
Meta’s free cash flow also turned negative in the third quarter, at minus $2.1 billion, as it guided to as much as $145 billion in capital spending this year. Its advertising revenue still grew 26%.
Intel’s fall had a different cause. Finance chief David Zinsner said the chipmaker did not expect to generate more cash than it spends this year, forecast weaker-than-expected fourth-quarter revenue and warned that the slowdown in personal computer demand would last at least through the first half of 2027. Intel is nonetheless increasing its spending on AI-related equipment.
Microsoft was the main exception. It reported positive free cash flow of $18.6 billion, revenue up 19% at $92.3 billion and cloud revenue up 30%. Its capital spending of $45.2 billion came in below its own $50 billion projection, which the company attributed to capacity delays at third-party suppliers rather than a deliberate pullback.
Why investors are nervous
For much of the AI boom, heavy spending was read as a sign of confidence. That reading is changing. The concern now is that firms whose core businesses once produced huge surpluses are seeing those businesses squeezed, while the cost of building AI infrastructure keeps rising. Part of the bill is also being met with borrowing: together, Microsoft, Alphabet, Amazon, Meta and Oracle have sold $326 billion of debt this year, three times the 2025 figure, according to S&P Global Market Intelligence data cited by TechCrunch.
“Investors have turned ruthless, punishing any signs of disappointment,” Kathleen Brooks, research director at trading firm XTB, told the BBC. Chris Low of FHN Financial told Reuters that the biggest players were showing “significant growing pains” as they pursued the AI build-out.
Keeping it in perspective
The sell-off follows a strong run. Even after Friday’s drop, the Nasdaq was up about 7.8% over the past year, and demand for cloud computing remains strong at Google, Amazon and Microsoft. Amazon’s cloud unit, AWS, grew 39% in the quarter.
The bigger question is whether AI revenue will grow fast enough to justify the investment, and which companies will capture that value. Brooks said a continued slump over the next few days could signal that the AI rally has peaked, though she pointed out that November has usually been a good month for stocks.
For readers in Pakistan and elsewhere, the swings matter beyond Wall Street. Global stock indexes and many retirement and investment funds hold large positions in these companies. This article is for information only and is not investment advice.
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