Nasdaq Tumbles 2% as AI Concerns Hit Amazon, Intel, and Reddit

The Nasdaq index experienced a 2% drop on Friday, with major technology companies including Amazon, Intel, and Reddit among those affected by growing concerns surrounding artificial intelligence. This downturn positions the tech-heavy index for a monthly decline.

For weeks, tech and AI stocks have exhibited volatile trading patterns as investors oscillate between fears of an "AI bubble" and optimism about emerging technologies. However, the third-quarter earnings season has amplified these concerns, with companies reporting disappointing revenues and significant spending.

Amazon's stock fell 1.9% after the e-commerce giant announced revenue of $201.9 billion and net income of $20.7 billion, both falling short of Wall Street expectations. The company also reported negative free cash flow of $42.4 billion. While Amazon Web Services, its cloud division, saw its highest revenue growth in years at 39% to $46 billion, this was insufficient to alleviate investor worries about its substantial spending plans. Amazon reaffirmed its 2026 capital expenditure forecast of $220 billion.

Intel experienced a significant decline of 29% despite a 21% rise in revenue to $13.7 billion. Investors focused on the struggles within its personal computer division, a consequence of the AI and data center boom. Revenue from data center and AI products increased by 78% to $7.3 billion. However, revenue in Intel's client computing and physical AI group decreased by 5% year-over-year to $8.1 billion in the third quarter, coinciding with a 4% drop in global PC shipments.

Intel projected adjusted earnings per share of 25 cents for the current quarter, with revenue expected between $15 billion and $16 billion, falling below analysts' estimates of $17.1 billion. "We see the PC slowdown continuing at least through the first half of next year," stated Chief Financial Officer David Zinsner, attributing the challenges to soaring prices and part shortages impacting the AI build-out.

Reddit's stock tumbled 24% despite a strong earnings report. The company's chief executive warned that Google's AI summaries are negatively impacting its web traffic, leading to a slowdown in user growth rates. The social media platform reported adjusted earnings per share of $1.40, exceeding expectations of $1.33, and a 51% revenue increase to $895 million, surpassing estimates of $874.9 million.

However, this positive financial performance was overshadowed by concerns over declining referral traffic from search engines. The company indicated that in October, search traffic dropped by an average of over 1 million referrals weekly. For the fourth quarter, Reddit anticipates revenue between $1 billion and $1.03 billion, below Wall Street's estimate of $1.05 billion.

Other companies in the AI memory sector, including Sandisk, AMD, Broadcom, and Nvidia, also saw declines, falling 8.3%, 8.9%, 4.7%, and 2.8% respectively. Neocloud stocks, which provide computing capacity to other companies, were also impacted, with CoreWeave down 8.1% and Nebius down 7.4%.

Earlier in the week, Alphabet experienced its largest single-day market cap decline, shedding over $500 billion, after disclosing that AI chatbot searches are affecting its primary search engine business. Microsoft also saw a dip in its stock price following a report of revised AI spending plans, interpreted by investors as a signal of tempered expectations for near-term AI investment returns. Alphabet fell an additional 1% and Microsoft 1.2% on Friday.

The Nasdaq is currently projected to finish the week down 1.5% and the month of October with a 4.6% loss.