Tech Stocks Plunge Worldwide as Earnings Disappoint
TREE NEWS reports: Global technology stocks are experiencing their most intense collective decline of the current earnings season, with futures on the Nasdaq 100 dropping 2% and Asian chipmakers bearing the brunt of the selloff. The rout marks the second consecutive day of losses for tech shares, as a wave of disappointing earnings accelerates the exodus from AI-related trades.
Intel plummeted 23% in after-hours trading after issuing a revenue forecast below market expectations—the largest single-stock drop this earnings season. Amazon fell about 7.3% after reporting third-quarter revenue growth of 12% to $201.9 billion, missing analyst estimates. While AWS cloud revenue grew 39% to $46 billion, marking its sixth consecutive quarter of acceleration, online retail growth hit a three-year low and advertising growth was the weakest since separate disclosure began in 2020. More concerning to investors, capital expenditures exceeded $77 billion in the quarter, far above expectations, and free cash flow over the past 12 months turned negative at $42.4 billion. CEO Andy Jassy added that capital spending will increase “significantly” further in 2027.
Alphabet, which reported the previous day, saw its shares plunge 13%—the largest single-day decline in its history. Search advertising revenue grew 12% to $63.3 billion, below the $64.9 billion consensus, and free cash flow came in at negative $9.1 billion. CEO Sundar Pichai characterized the lag in AI search monetization as a deliberate choice, comparing the current phase to the mobile transition a decade ago: “Just like a decade ago when we pivoted to mobile, we’re focused on building the best search experience first, then monetizing it.” Markets were unconvinced.
Market Implications: Rotation, Risk-Off, and Rising Rates
The selloff has triggered a pronounced rotation out of technology and into other sectors. On Thursday, more than 400 S&P 500 constituents advanced, while the index itself fell only 0.3%. The Philadelphia Semiconductor Index dropped 1.4% and the Nasdaq 100 lost 1.4%, highlighting that the damage remains concentrated in tech for now. In Asia, South Korea’s KOSPI fell 4.5%, prompting the exchange to activate a sidecar mechanism to halt program selling. SK Hynix tumbled over 8% and Samsung Electronics dropped more than 5%. Taiwan’s weighted index fell over 3% at the open, Japan’s Nikkei 225 declined 2%, and the MSCI Asia-Pacific index lost 1.2% to 259.45.
Capital flowed into safe-haven assets. The yield on the 10-year U.S. Treasury note fell 8.5 basis points to 4.902%, a seven-week low, while the two-year yield dropped 8.7 basis points to 4.5648%. Fed funds futures rose as traders reduced bets on further rate hikes, with the market now pricing about a 70% probability of a December hike. Cryptocurrencies were not immune: Bitcoin fell about 2% to around $77,200. Meanwhile, Binance, the world’s largest crypto exchange, announced it had frozen approximately $3 billion in assets following a suspected hack, though it said it has not confirmed whether customer funds were affected.
“This earnings season has been quite difficult for AI players, with most companies being punished amid AI bubble and inflation concerns,” said Anna Wu, founder and investment strategist at Floodlines Research. “The market is not worried that AI demand has slowed, but that higher financing costs and credit risks could eventually force hyperscalers to slow infrastructure buildout.” Greg Boland, market strategist at Moomoo, added: “The broader signal is that investors want more than AI promises. Tech valuations are stretched, and the market needs clearer evidence that heavy capital spending can translate into profits and cash flow.”
Key Takeaways for Investors
- AI monetization is under scrutiny: The market is no longer rewarding AI spending unconditionally. Companies that can demonstrate disciplined capital allocation—like Microsoft, whose cloud revenue grew 48% with more restrained capex and whose shares fell less than 1%—are being rewarded.
- Rotation is underway: The fact that over 400 S&P 500 stocks rose while tech fell suggests investors are diversifying rather than exiting equities entirely. This rotation could continue if tech earnings disappoint.
- Watch the bond market: Falling Treasury yields signal growing risk aversion and reduced expectations for further rate hikes. However, strong economic data and persistent inflation pressures may limit the downside for yields.
- Asia’s chip cycle is vulnerable: The sharp declines in Korean and Taiwanese chipmakers underscore their sensitivity to global tech demand and AI spending trends. The sidecar activation in Korea highlights the severity of the move.
- Crypto remains correlated: Bitcoin’s decline alongside tech stocks reinforces its current role as a risk asset rather than a safe haven. The Binance incident adds idiosyncratic risk to the crypto market.
