US technology shares fell sharply as investors questioned whether the industry’s vast artificial-intelligence spending will produce returns quickly enough to justify the cost. Intel plunged, Alphabet extended a steep sell-off and Amazon also declined. The retreat followed earnings reports that highlighted mounting investment, cash-flow pressure and signs that AI may unsettle established businesses.
Key takeaways
- Intel shares fell 28% on Friday; Alphabet dropped a further 1.4% after plunging about 12% the day before.
- Five major technology groups have outlined about $800bn in combined spending for 2026, while broader forecasts put AI infrastructure investment close to $1tn.
- Investors are looking for evidence that AI spending can translate into sustainable revenue and cash flow.
Spending plans meet investor scrutiny
The Nasdaq Composite fell 2.8% on Friday, capping its weakest month since March, as concern spread across technology and chip shares. Intel lost more than $130bn in market value during its fall. The company plans to increase AI-related investment even as demand for personal computers — an important market for its processors — weakens. Finance chief David Zinsner said Intel did not expect to generate more cash than it spent this year and warned that the PC slowdown could continue into the first half of next year.
Meta, Alphabet, Oracle, Amazon and Microsoft together expect to spend around $800bn in 2026. Separate estimates suggest total AI infrastructure investment could approach $900bn next year. The scale of the plans has sharpened a central question for investors: how long can companies keep expanding data centres, buying chips and developing models before those investments pay off?
Alphabet’s cash-flow warning weighs on shares
Alphabet’s results put that question in focus. The Google owner reported negative free cash flow of $9.1bn for the latest quarter after raising AI investment, including capital expenditure of $51.3bn. It expects investment to reach as much as $205bn this year. Its shares lost more than $500bn in market value on Thursday, then fell again on Friday.
Investors were also troubled by signs that AI-generated answers may affect Google’s core search advertising business. Search revenue grew more slowly than earlier in the year, and the company acknowledged that conversational AI searches can be less easily monetised through advertising. Yet Alphabet’s cloud business more than doubled sales, illustrating the potential for AI demand to create new revenue as well as challenge existing ones.
A more selective market for AI
Amazon shares fell after the company disclosed heavy spending on AI infrastructure and other investments. Reddit dropped 29% after reporting weaker-than-expected daily user figures and warning that Google’s AI-driven search could reduce referral traffic. The contrasting fortunes of companies reporting strong cloud growth and those facing weaker cash flow suggest investors are becoming more selective, rather than rejecting AI outright.
For Power AI Media readers tracking AI tools and their wider effects, the market reaction is a reminder that technological promise and commercial viability are not the same thing. The coming quarters will test whether spending on AI produces durable growth — and how companies manage the disruption it brings to established products, businesses and online media.