North American Stocks Fall as Investors Weigh AI Spending
North American stocks fell Friday as investors reassessed the cost of artificial-intelligence investments and the earnings those investments may generate.
The technology-heavy Nasdaq composite declined 2.9 per cent, while the S&P 500 fell about 1.8 per cent, its steepest daily drop since June. The Dow Jones Industrial Average lost 1.1 per cent. In Canada, the S&P/TSX composite closed 1.7 per cent lower after falling as much as 2.3 per cent during the afternoon.
Intel shares dropped 28.6 per cent after the chipmaker forecast profit below analysts’ expectations for the final three months of the year. The decline came despite stronger-than-expected profit in its latest quarter. Nvidia fell 4.2 per cent and was the largest contributor to the S&P 500’s decline.
Amazon shares slipped 1.4 per cent after its summer profit missed expectations. The company reported spending $94.8 billion US on property and equipment over the previous 12 months, primarily on AI-related investments. It also reported negative free cash flow of $42.4 billion US. Alphabet had fallen more than 12 per cent the previous day after reporting increased cash spending associated with AI.
The results have prompted questions about whether large investments in data centres and other AI infrastructure will produce sufficient profit and productivity gains. Investors are also weighing whether high interest rates could slow further data-centre construction.
Losses were not uniform across the market: nearly as many S&P 500 stocks rose as fell. ExxonMobil and Chevron gained after reporting profits above analysts’ forecasts. Mondelez International and Colgate-Palmolive also advanced following their earnings reports.
In the bond market, the yield on the 10-year U.S. Treasury fell to 4.93 per cent from 4.98 per cent late Thursday. European stock markets were mostly lower. South Korea’s Kospi declined amid AI-related concerns, while Hong Kong’s Hang Seng edged higher.