Intel Plunges 28% as AI Spending Nears $1tn and Investors Balk

Intel lost more than $130bn in market value on Friday as its shares plummeted 28%, the sharpest single blow in a two-day tech selloff driven by fears that AI spending has outrun the money it generates. The Nasdaq closed October with its worst monthly slide since March 2025.

The rout hit the sector's biggest names. Alphabet fell another 1.4% on Friday after a 12% plunge on Thursday that erased more than $500bn (£374bn) from its market value. Amazon ended Friday down 1.4%, recovering some overnight losses. Reddit dropped 29%, and Roblox fell 18%.

How big is the spending bill?

Five companies — Meta, Alphabet, Oracle, Amazon and Microsoft — have committed $800bn in combined spending for 2026, an average of $160bn per firm in a single year. Alphabet alone expects to spend up to $205bn this year on investments, almost entirely related to AI. Amazon has committed $220bn in 2025, directed at AI data centres, network equipment and servers.

The problem, according to analysts quoted in the coverage, is that earnings are not consistently meeting expectations while the cash out the door accelerates. The fear now circulating in the market is a classic bubble scenario: the cost of building AI data centres and developing software may exceed what firms can ever earn back, leaving sky-high valuations without justification.

What did Intel and Alphabet actually say?

Intel said it plans to increase AI spending despite weaker demand for computers, a major source of demand for its microprocessors. On Thursday, finance chief David Zinsner said the company did not expect to bring in more cash than it spent this year and forecast lower-than-expected fourth-quarter revenue.

"Looking ahead, we see the PC slowdown continuing at least through the first half of next year," Zinsner said in the chip maker's third-quarter earnings report. On the earnings call, he added that Intel had significantly ramped up equipment investment in the third quarter and expected that spending to become "even more significant" in the following three months — a promise of higher costs paired with weaker demand, not a combination investors reward.

Alphabet's damage was self-inflicted in a different way. The company revealed that the AI summaries it now shows as the top answer to search queries were hurting its core search advertising revenue, the business that funds the entire AI build-out. That admission, not the spending itself, triggered Thursday's $500bn-plus wipeout.

Where did the smaller players land?

Amazon disclosed on Thursday that it had spent more cash than it made, with spending increasing six-fold over three months. Reddit blamed weaker-than-expected daily user figures and warned that Google's growing AI-driven search was hurting its referral traffic — evidence that AI is now cannibalizing other businesses in the ecosystem, not just costing their owners money. Roblox reported a drop in daily active users.

Is this the end of the AI trade?

Chris Low of FHN Financial told Reuters the market was reacting chiefly to the biggest players such as Amazon and Google. The companies were "showing some pretty significant growing pains as they aggressively pursue the AI build-out," he said. "The thinking is that these signs suggest that the entire sector is going to slow down."

Kathleen Brookes, research director at trading firm XTB, put the shift in mood more bluntly. "Investors have turned ruthless, punishing any signs of disappointment in [third quarter] earnings," she said. "The AI trade has had a good run in recent years, but now investors want payback, and companies like Alphabet and Intel are in the crosshairs."

The longer-term record tempers the panic, though it does not settle the question. The Nasdaq closed 2.8% lower on the day but remains up 7.8% over the past year. Amazon is up nearly 8% over 12 months; Alphabet is down 1.3%. November is historically a strong month for stocks, as Brookes noted.

Her closing caution is the one to watch: "If we see AI stocks continue to struggle in the coming days, it could suggest the AI trade is past its peak, and investors will be looking for a new theme to drive markets." In plain terms, this week punished the spending; the next few weeks will test whether the earnings ever arrive.