stockrowTechnology Shares Lead Market Selloff
Alphabet, Amazon and Intel led a sharp selloff in technology shares as investors questioned whether the enormous cost of artificial-intelligence infrastructure was translating into adequate returns. The Nasdaq fell 3.7% in a session late in the week, while the S&P 500 lost 2.4% and the Dow declined 1.4%. The retreat followed an early-week rally fueled by AI optimism and strong semiconductor earnings. Investors shifted toward Treasuries and more defensive shares, while rising borrowing costs and elevated oil prices added to the pressure on growth stocks.
Alphabet Falls on Search Concerns
Alphabet fell 12.6% after reporting third-quarter earnings, erasing nearly $500 billion in market value. Revenue rose 25% to $127.6 billion, but search revenue grew a slower 12% to $63.4 billion and advertising sales missed expectations. Google said users were conducting more searches through AI Mode, yet those queries generated less advertising revenue than traditional searches. It began expanding advertising in AI-powered search internationally, but the results exposed the tension between defending Google’s search business and introducing services that currently monetize less effectively.
Alphabet Cloud Growth and Spending
Alphabet’s cloud business offered a contrast: Google Cloud revenue more than doubled to $30.7 billion, with operating income reaching $11.1 billion and its backlog growing to $561 billion. The company spent $51.4 billion on capital expenditures during the quarter, however, and free cash flow was negative $9.1 billion for a second consecutive quarter. An $8.7 billion loss on equity investments also weighed on earnings. Alphabet maintained its annual capital-spending range of $195 billion to $205 billion and said expenditure would rise in 2027.
Amazon Spending Overshadows AWS Growth
Amazon also fell after its results, despite AWS revenue accelerating 39% to about $46 billion. Total revenue rose 12% to $201.9 billion, but earnings missed expectations, advertising was softer than forecast and online retail sales grew only 2%. Amazon spent more than $77 billion on property and equipment in the quarter, and its trailing free-cash-flow outflow reached $42.4 billion. Management maintained plans for approximately $220 billion in capital spending this year. Investors also took a cautious view of its holiday-quarter revenue guidance of $240 billion to $247 billion.
Microsoft Posts Stronger Results
Microsoft provided a stronger earnings comparison. Revenue rose 19% to $92.3 billion, earnings per share beat estimates and Azure revenue increased 48% to $33.2 billion. Unlike several peers, Microsoft generated positive free cash flow, although its capital spending remained substantial. It planned an investment-grade bond sale of at least $25 billion to help fund corporate needs, including AI investment, and offered voluntary exit packages to roughly 60,000 eligible employees across several countries. The offer represented eligibility rather than a confirmed number of departures.
Meta Funds AI Expansion
Meta’s AI financing plans highlighted the growing role of equity markets in funding the buildout. The company priced $25 billion of common stock and a $12.5 billion convertible preferred offering, alongside plans for an additional program of up to $60 billion in nonvoting shares. Nvidia committed $3 billion and AMD $1 billion to the offering as part of expanded partnerships, drawing attention to suppliers financing a major customer. Meta reported third-quarter revenue of $64.6 billion, helped by AI-supported advertising, but free cash flow turned negative and its annual capital-spending forecast rose to $135 billion–$145 billion.
Anthropic Filing Reveals AI Commitments
Anthropic’s public filing added detail to the financial commitments supporting the AI boom. The Claude developer reported first-half revenue of $16.3 billion, compared with $1.1 billion a year earlier, and an $80.7 billion net loss largely driven by noncash valuation charges on convertible securities. Its prospectus disclosed hundreds of billions of dollars in computing commitments, customer concentration and substantial dependence on external infrastructure. Bankers discussed a possible valuation of $1.5 trillion to $2 trillion, but the company had not disclosed a final offering price or share count. Its governance structure gives founders substantial voting control.
AI Infrastructure Financing Expands
Financing arrangements around Anthropic illustrated how far the industry was extending its commitments. Broadcom assembled a $63 billion package with banks and Blackstone to finance AI accelerators and networking equipment that would be leased to Anthropic, with Broadcom supporting residual values. Anthropic also disclosed extensive cloud and hardware agreements involving Google, Amazon and other suppliers. Separately, SpaceX secured approximately $40 billion in financing for AI chips and data-center hardware through a leasing structure involving an Apollo-managed entity.
SpaceX Results and Tesla Talks
SpaceX reported third-quarter revenue of $14.6 billion and net income of $4.4 billion. Its super-intelligence division generated $7.6 billion in revenue, overtaking Starlink by sales, while satellite connectivity remained highly profitable and reached 13.6 million subscribers. Capital expenditure totaled $19.6 billion, mostly for AI. Shares nevertheless fell below $140 during the broader technology retreat and post-lockup selling. Elon Musk also confirmed that independent committees were examining a possible SpaceX–Tesla combination; no agreement had been reached, and questions remained over valuation, conflicts of interest and regulatory approval.
Credit Tightens for AI Providers
Credit conditions became more difficult for smaller AI infrastructure providers. CoreWeave shares fell sharply during October as investors focused on its heavy debt load and unsecured bond yields near 15%, despite a large contracted revenue backlog. Nebius obtained a $3.5 billion Citi facility for data-center and GPU purchases, but its shares also came under pressure. Musk warned that financing had tightened for specialized cloud providers. Across the sector, lenders demanded higher yields and greater protection, even as major customers continued to sign substantial capacity contracts.
Intel Shares Plunge on Guidance
Intel became one of the week’s biggest casualties. Its third-quarter revenue rose about 21% to $16.5 billion and adjusted earnings beat estimates, supported by almost 80% growth in its data-center and AI business. But fourth-quarter revenue guidance of $15 billion–$16 billion fell well short of expectations, and the shares plunged nearly 30%, erasing more than $100 billion in market value. Intel cited a sharp deterioration in PC-chip demand as memory shortages raised computer prices, as well as manufacturing and packaging constraints that limited its ability to supply servers. A deadly accident at an Israeli factory was expected to reduce quarterly revenue by about $300 million.
SK Hynix Benefits from AI Memory Demand
The memory industry showed both the strength and the volatility of AI demand. SK Hynix reported record quarterly revenue of 104.6 trillion won and operating profit of 83.3 trillion won, driven by higher prices and demand for advanced memory used in AI systems. It accelerated HBM4 production, secured long-term commitments for more than half of its 2027–2028 capacity and announced roughly 100 trillion won in shareholder returns for the year. The results initially lifted Korean and other Asian technology shares, though the regional rally later reversed as US earnings unsettled investors.
Memory Makers Face Cycle Concerns
SanDisk reported fiscal first-quarter revenue of $11 billion, up 378% from a year earlier, as data-center revenue rose sharply. Adjusted free cash flow was $5.7 billion, and the company announced an eight-for-one stock split and long-term agreements covering roughly half of fiscal 2027 bit shipments. Its shares nevertheless fell after Kioxia signaled slower NAND price growth and investors reassessed the memory cycle. Micron also cited long-term customer agreements and strong AI demand, while Intel’s warning showed that high memory costs were simultaneously hurting the PC market.
Infrastructure Suppliers See Strong Demand
The infrastructure boom supported suppliers beyond chip manufacturing. Vertiv’s orders more than doubled from a year earlier, prompting it to raise its annual outlook as demand for data-center power and cooling equipment increased. Celestica reported 83% quarterly revenue growth, driven by networking and computing hardware. Caterpillar’s power-generation sales rose 30%, helping produce record backlog, although its shares fell amid broader selling of economically sensitive stocks. GE Vernova agreed to buy high-voltage equipment maker Trench Group for $9 billion, while the US Energy Department outlined up to $5 billion in financing for Constellation Energy reactor upgrades.
AI Hardware Competition and Scrutiny
Competition and regulation remained prominent in AI hardware. Marvell shares fell after reports that it was in advanced talks to acquire optical-components supplier Lumentum; no agreement was announced. Nvidia faced Justice Department scrutiny of acquisitions and investments, including its proposed Hugging Face deal, and continued to contend with US export restrictions and limited access to the Chinese AI-chip market. Oracle, meanwhile, outlined plans to add Google TPUs and Cerebras processors to its cloud offerings, and its shares rallied after it presented targets for positive free cash flow and limits on additional fundraising.
Federal Reserve Holds Rates
The Federal Reserve held its benchmark interest rate at 3.75%–4.00% in a split vote, with two policymakers favoring a quarter-point increase. Officials described the economy as growing strongly but said inflation remained elevated. September core personal-consumption-expenditures inflation was 3.1% year over year, while stronger-than-expected third-quarter GDP underscored the resilience of activity. Chair Kevin Warsh said interest rates affect AI investment, countering the argument that demand for new computing capacity was insulated from financing costs. The Fed also announced a reduction in the number of rate decisions on its future calendar.
Global Rates and Oil Pressures
In Europe, the ECB held rates, and President Christine Lagarde announced her resignation effective February 7. The euro-zone economy grew 0.4% in the third quarter. The Bank of Japan also kept rates unchanged while announcing faster sales of its exchange-traded-fund holdings. Oil remained a major source of inflation pressure: Houthi attacks on Saudi facilities and incidents near the Strait of Hormuz revived supply concerns after an earlier easing in prices. Brent traded above $116 a barrel at points, while US gasoline prices were around $4.27 a gallon. ExxonMobil and Chevron benefited from stronger profits as energy shares provided some support to the market.
Brazil Election Shocks Investors
Brazilian assets suffered a separate political shock after Luiz Inácio Lula da Silva won the presidential runoff against Flávio Bolsonaro. Investors had positioned for a different result, and the Brazil-focused EWZ fund fell sharply as Petrobras and digital bank Nu Holdings also sold off. The result revived concerns about fiscal policy, state involvement and the pace of interest-rate cuts. The reaction spread to European companies with significant Brazilian operations, including Santander, Telefónica and AB InBev. In China, the STAR 50 index’s roughly 40% decline from its July peak highlighted the pressure on highly valued AI and chip shares.
Crypto Markets Hit by Breach
Crypto markets weakened as Binance disclosed a major security breach affecting about $6.3 billion in assets. Investigators linked the attack with high confidence to North Korean hackers; Binance paused withdrawals, said it would cover user losses and reported that approximately $3 billion had been frozen, including stablecoins frozen by their issuers. Bitcoin fell toward $77,000 and crypto-related shares declined. Coinbase separately reported a 34% drop in quarterly revenue as trading activity weakened, while prediction-market operator Polymarket temporarily halted trading after a third-party breach and pledged to reimburse affected users.
Delivery Deal and Other Transactions
DoorDash agreed to acquire Instacart for $17 billion, offering $65 per share in a transaction combining cash and stock. The deal brings together DoorDash’s restaurant-delivery network and Instacart’s grocery marketplace as both compete with Amazon and Walmart for local retail orders. In another transaction, Thrive Holdings agreed to take ADT private for $10 a share, valuing its equity at $7.6 billion and the business at about $15.3 billion including debt. India’s Jio Platforms raised $3.2 billion in its initial public offering, and its shares rose 21% on debut.
Automakers Report Mixed Results
Automakers reported uneven results. Rivian raised its annual delivery forecast to 67,000–70,000 vehicles after R2 sales helped lift quarterly revenue 38% to $2.16 billion and narrow its adjusted loss. It also expanded its Volkswagen joint venture to license elements of its AI voice assistant. Ford beat earnings estimates but reported continued electric-vehicle losses and higher commodity costs. Stellantis narrowed its quarterly net loss by 90% to €453 million as cost cuts progressed, although industrial free cash flow remained negative. Audi defended plans for a $4 billion Georgia plant, subject to Volkswagen supervisory-board approval, amid tariff pressures.
Telecoms Face Potential SpaceX Competition
Telecommunications companies faced questions about a possible new competitor as SpaceX pursued access to as many as 80,000 US cell sites for a terrestrial network complementing Starlink. Incumbent carriers pressed the Federal Communications Commission on spectrum rules, while Verizon argued that building nationwide coverage would require extensive infrastructure and years of investment. Verizon nevertheless raised its annual outlook after strong subscriber gains and signed a multibillion-dollar fiber agreement with AWS. AT&T continued replacing its declining copper network with fiber and wireless services, reporting gains in both phone and fiber customers.
Healthcare and Aerospace Results
Outside technology, Eli Lilly raised its annual revenue forecast for the third time to $91 billion–$92 billion after strong sales of diabetes treatment Mounjaro and obesity drug Zepbound. Boeing shares fell about 11% as a larger commercial-aircraft loss and a slower 737 production ramp overshadowed a record $745 billion backlog. Airbus maintained its delivery target despite weaker quarterly profit and continued supply-chain delays. JetBlue reported a wider loss and worsening margin outlook as fuel costs climbed, while its creditors retained advisers to examine senior notes.
Consumer Results and Housing Pressures
US consumer results remained mixed. Coca-Cola raised its earnings outlook as Coke Zero and Diet Coke volumes grew, while Starbucks reported stronger comparable sales led by North America and outlined a large expansion there. Chipotle increased comparable sales 2.1%, though costs and promotions squeezed its operating margin; Hershey lowered its organic-sales outlook as higher candy prices weighed on Halloween demand. Housing affordability also remained strained: national home prices rose about 2.1% year over year in August, while higher mortgage rates encouraged more sellers to cut asking prices or offer concessions. Jobless claims remained low, but a modest September payroll increase pointed to a labor market with limited hiring.