Weak Earnings From Tech Giants Spark Heavy Selling
US tech majors reported earnings this week, mostly missing expectations, as all-out spending on AI infrastructure triggered heavy selling on Wall Street. Alphabet, the parent of Google, was the hardest hit, with shares plunging more than 12% after quarterly revenue missed targets and core search growth slowed, seen as the first warning sign of AI chatbots eating into the search market. To fund its massive AI infrastructure buildout, its free cash flow turned to negative $9 billion, 3 times the Wall Street estimate.
Intel, Amazon and Facebook Tumble Together
Intel collapsed 23% after revenue and profit fell far short of expectations on weak PC processor demand and supply chain problems. Amazon's cloud business kept growing, but to capture AI demand its third-quarter capital spending was staggeringly high, leaving earnings per share below market expectations, while its fourth-quarter revenue guidance also disappointed, sending shares down 7%. Facebook likewise saw its cash reserves hollowed out by AI investment, forcing it to raise funds through a rare new share issuance.
Rising Funding-Chain Risk for Compute Lixin Startups
The CEO of Tesla and SpaceX warned that more than 200 emerging AI cloud compute providers worldwide face a wave of mass failures and consolidation. In recent weeks bond markets have almost shut off financing to companies with no sizable independent revenue source other than AI data centers. New-style cloud vendors represented by Nebius and CoreWeave largely expanded rapidly by borrowing heavily to buy Nvidia chips, and once banks and bond markets stop lending, their funding chains could snap at any time.
Vision Rally Cools as Microsoft Holds Up Market
The sole exception was Microsoft, which held the line in the AI cash-burn battle on a 46% surge in cloud business, with free cash flow beating expectations by $10 billion. Overall, merely mentioning an AI vision no longer lifts shares as it once did, and the market now demands actual profits. The reckless borrowing and cash burn have deepened fears of a repeat of the dot-com bubble, intensifying anxiety over the sky-high AI arms race.