Intel closed at $65.76 on Friday after losing 28.58% of its value in a single session. It was the stock’s worst day since 1974.
The strange part is that the quarter itself was good. Revenue in the Data Center and AI division jumped 78% year over year to $7.3 billion, helped by higher server shipments and stronger pricing. Investors looked past it. The fourth-quarter outlook cited weakening PC demand, manufacturing constraints and continued spending on the turnaround, and the company warned that positive cash flow this year will be difficult. Intel had also beaten earnings expectations, and it made no difference. Under the hood, the data center business looks healthy; the trouble sits in PCs, where higher memory chip costs are hurting consumer demand.
The tape
Trading was frantic. 447.8 million shares changed hands, about 314% above the three-month average of 108.1 million. Even so, Intel is still up 78% this year, which Mike Dickson of Horizon Investments put down to profit taking after “a phenomenal year.”
The damage spread quickly. AMD fell 10.88% to $504.80. Nvidia dropped 4.22% to $204.64. A closely watched index of chipmakers sank 7.2%. Seagate and Western Digital lost 7% and 13% respectively, with memory shortages and factory suspensions weighing on the traditional PC market. The Nasdaq Composite finished at 25,437, down 2.86%, and the S&P 500 closed at 7,561. The Nasdaq 100 is now roughly 10% below its October 6 high, which is the textbook definition of a technical correction.
Show me
Amazon slid 1.4% after an earnings report pointing to more AI spending while sales and profit missed analysts’ expectations. It posted negative free cash flow of $42.4 billion over the past 12 months. Meta disclosed a quarter of negative free cash flow for the first time since 2012. Alphabet has now had two such quarters in a row, a first. Microsoft, by contrast, announced $18.6 billion of positive free cash flow, and its shares are down only 4% from their record.
JPMorgan expects global AI capital expenditures to reach $900 billion by 2026. Markets have started to ask what that buys. “We’re moving out of the hopes and dreams phase of the AI trade and into the ‘show me’ phase,” said Joe Tigay of Equity Armor Investments. Neil Wilson of Saxo Markets was blunter: “Investors don’t just want capex, they want to see the returns already.” The VIX touched 24 during the session.
Not everyone is gloomy. “The AI trade is down, but not out,” Paul Stanley of Arca said. “This is not the first tech and AI correction, and it won’t be the last.”
As ever, the detail that matters is the order of events: the sell-off began with a company whose AI-related business grew 78%. Shares of ServiceNow, meanwhile, had fallen 27% the day before, their worst day on record, and dropped another 4% on Friday.
Sources
- Semiconductor Stocks Plunge on Intel Sell-off! Summary of Major Index Trends and AI Stock Earnings｜いつもありがとう＠感謝です!!
- Nasdaq suffers worst month in over a year as AI nerves roil markets | CNN Business
- Stock Market Today, Oct. 30: Intel Plunges Nearly 29% as Weak Outlook Rattles Wall Street
- U.S. Tech Stocks Plunge Amid AI Profit Concerns and Inflation Pressures | KuCoin
- U.S. Tech Stocks Plunge Amid AI Profit Concerns and Inflation Pressures | KuCoin
Photo: Jacek Halicki (CC BY-SA 4.0)
