Intel Falls 28.6%, Worst Drop Since 1974, as AI Selloff Hits S&P 500

Intel fell 28.6% on Friday — its worst single-day drop since 1974 — as a tech selloff over inflated AI valuations gave the S&P 500 its worst day since June.

The S&P 500 tumbled 1.8%, closing down 140.32 points at 7,580.07 and notching a third straight losing week. The Nasdaq composite sank 2.9%, or 747.73 points, to 25,437.00. The Dow Jones Industrial Average dropped 572.25 points, or 1.1%, to 51,770.31.

The market sits only 3.1% below its all-time high — a level that has lifted the value of workers' 401(k) accounts — but it has grown shakier ahead of Tuesday's U.S. midterm elections. AI worries have already become a concern for voters across political parties, and President Donald Trump has historically used the stock market's performance as a measure of his own success.

Why did Intel crash?

The chipmaker forecast fourth-quarter profit below analysts' expectations. CEO Lip-Bu Tan said the personal-computer industry continues to feel pressure. The plunge came even though Intel reported a stronger profit for the latest quarter than analysts expected.

Nvidia, the chip company that became the poster child of the AI frenzy, fell 4.2% — the single heaviest force pulling the S&P 500 downward, outweighing even Intel.

Amazon dropped 1.4% after reporting weaker summer profit than analysts expected. More concerning for investors: the company burned through $42.4 billion of cash over the prior 12 months by the free-cash-flow measure, spending $94.8 billion on property and equipment, primarily AI investments.

A day earlier, Alphabet stock had dropped more than 12% — its worst day on record — after telling investors it burned through more cash during the summer than the spring. The company behind Google and YouTube cited similar mammoth AI investments.

Joe Tigay, portfolio manager at Equity Armor Investments, told investors in a note: "We're moving out of the hopes and dreams phase of the AI trade and into the 'show me' phase."

The core worry: whether hundreds of billions of dollars in AI spending will produce enough profit and productivity to justify the cost. Chip stocks and other data-center winners also face pressure from high interest rates, which may slow the further build-out of data centers.

What happened in crypto?

Crypto stocks tumbled after a hack on Binance, the world's biggest crypto exchange. Bitcoin fell below $77,000 from more than $86,000 earlier this month. A U.S.-based blockchain intelligence firm said a North Korean unit was likely behind the attack, which affected more than $6 billion worth of crypto at Binance.

Coinbase Global fell 10.6% despite reporting stronger quarterly results than analysts expected. Strategy, which says it owns about 4% of the total bitcoin supply, dropped 7.8% even after beating profit expectations. Strategy also said its chief financial officer will resign next week for personal reasons.

Where did investors hide?

Outside tech, stocks held up. Nearly as many S&P 500 stocks rose as fell, with many rallying on stronger-than-expected summer profits.

ExxonMobil climbed 2.2% and Chevron added 1.8% after the oil giants beat profit estimates. Mondelez International rose 3.9% on stronger-than-expected growth for the company behind Oreo cookies and Ritz crackers. Colgate-Palmolive gained 2.3% as higher prices around much of the world drove better revenue and profit than analysts expected.

Those beats matter. Expectations for corporate profit growth drove the S&P 500 to its record earlier this month, even with consumers worldwide discouraged by high inflation and high fuel prices.

Bonds, oil and global markets

Treasury yields eased as investors bought U.S. government bonds for safety. The 10-year Treasury yield fell to 4.93% from 4.98% late Thursday and from more than 5.30% earlier in the month.

Yields fell even as oil bounced higher — a move that usually pushes yields up because it worsens inflation. Brent crude rose 2.4% to $113.43 a barrel, near the high end of its range since the war with Iran sent oil prices and inflation higher.

Abroad, European indexes were mixed after sharper swings in Asia. South Korea's Kospi dropped 3.5% as AI worries hit its tech-heavy market; Hong Kong's Hang Seng climbed 1.5%. Japan's Nikkei 225 fell 2.1% after the Bank of Japan kept rates steady, echoing moves earlier in the week by the Federal Reserve and the European Central Bank.

With mega-cap AI spenders now reporting shrinking cash piles and chipmakers guiding lower, the 'show me' phase starts with next quarter's numbers.