AI Stocks Stumble as Intel Craters and Hyperscalers Pull Back Spending

The AI trade just took a beating, and the pros are getting nervous. Intel got hammered for a 25% loss Friday on weak revenue guidance, Micron slid 5.5% and Nvidia dropped 4%, according to CNBC. On the hyperscaler side, Amazon shed 2% and Google lost another 1% — one day after Alphabet's worst trading session ever, triggered by a drop in core advertising revenue.

The AI-adjacent names are now in a bear market or wobbling on the edge of one, even as the broader bull run holds. The S&P 500 sits just a few percentage points off its record, propped up by money rotating into non-AI stalwarts like Procter & Gamble, Berkshire Hathaway, Coca-Cola, Walmart and Eli Lilly — all of which gained more than 1% Friday. Market veterans say it might be a moment to lock in some gains or hedge the risk, per CNBC.

Two data points drove the week's mood. Anthropic's public filing carried little detail on future revenue after the company reported slowing sales from the second quarter to the third, per CNBC. Meanwhile, Big Tech earnings revealed hyperscalers are trimming capital expenditures — signaling they see a ceiling on how much computing power they'll ultimately need.

The math is getting uncomfortable: years of spending still have to prove out in profits. J.J. Kinahan, SVP at Cboe Global Markets, told CNBC the reward is probably coming, but that the upfront money keeps piling up. He said the boom of the past few years is now in question. YieldMax strategist Mike Khouw put it simply — more chopping is likely ahead.

Options desks are watching behavior flip. Dennis Davitt, CIO and co-founder of Millbank Dartmoor Portsmouth, said tech stocks historically carry call skews, with investors buying upside greed over downside insurance. That reversed in the last three days. But there's a twist: confidence in AI products themselves may be rising, with Davitt pointing to Meta's Muse and saying less fear is priced into Meta than into Amazon.

Google executive Philipp Schindler noted Wednesday that surging AI mode queries come with lower monetization right now. Longer out, the trade lives or dies on productivity and profit. Paul Tudor Jones of Tudor Investment Corporation said earlier this month the odds were 60-40 that markets head toward a tipping point, comparing AI-related issuance's share of GDP to railroads, highways and telecom buildouts. BTIG's Jonathan Krinsky, meanwhile, advised fading the chip bounce.