Big tech loses $3.7 trillion in one month as investors grow cynical over AI spending
Close to $4 trillion was wiped off the market value of the world’s most profitable technology companies in October as spooked investors warily eye an industry-wide spending spree on artificial intelligence (AI) and data centres.
The tech-dominated US Nasdaq index suffered a multitrillion-dollar loss for the month, with a nasty six per cent drop in AI trading blowing a $US2.6 trillion (approximately $3.7 trillion) hole in their collective value.
The tech-dominated Nasdaq suffered a multitrillion-dollar loss as investors were spooked by big tech’s AI spending. Yuki Iwamura
A panicked sell-off in big tech stocks sent values in the likes of Google parent company Alphabet, Facebook and Instagram owner Meta, and Amazon plummeting across the 31-day period.
The Nasdaq Composite dropped by 2.86 per cent on Friday alone, marking its worst single-day loss since June.
The S&P 500 also fell by 1.82 per cent, closing out the third-straight losing week in October.
Alphabet, which owns Google, suffered the biggest drop after taking a 12.6 per cent nosedive in a single day in October.
Around $US500 billion ($712 billion) in value was scrubbed from Alphabet after chief business officer Philipp Schindler said Google’s AI mode was depleting search advertising revenue.
The company’s aggressive AI spending also contributed to Alphabet’s increased capital expenditures after it burned through $US51.4 billion, mostly through data centre expansion and custom AI chips.
Meta copped a 15 per cent market plunge throughout the month of October after Facebook’s parent company announced its mammoth AI spending plans.
Mark Zuckerberg-run Meta flagged a record-setting equity fundraising plan of up to $US97.5 billion to offset its sprawling AI infrastructure, inflaming investor anxiety over the circular flow of capital in the data centre economy.
Meta copped a 15 per cent market plunge throughout October after Facebook’s parent company announced its mammoth AI spending plans. Tony Avelar
Amazon shares also fell by 5.6 per cent after its third-quarter earnings report projected a $US220 billion in capital expenditure to meet its lofty AI data centre plans.
Shares for computer company Intel fell by 29 per cent, erasing $US140 billion in market capitalisation, amid weakening PC demand – the tech giant’s worst day of trading since 1974.
The soaring losses were driven by investors growing skittish about the AI arms race, which has yet to pay off for most major companies.
“Now that the combined capital spending boom at the hyperscalers is becoming partly dependent on external financing, investors are becoming more nervous about the sums they are collectively investing and how they are doing it,” Capital Economics markets investor John Higgins told Reuters.
The US midterm elections and a series of corporate earnings reports are expected to put fresh pressure on tech stocks and test investor patience regarding the pattern of aggressive AI spending.
Share a tip-off, video or photo with us
