Wall Street’s technology sell-off intensified as investors questioned whether the huge sums being poured into artificial intelligence will generate enough profit, sending the S&P 500 to its worst session since June and weighing on Australian sharemarket futures.
The S&P 500 fell 1.8 per cent, extending its losing streak to three weeks. The technology-heavy Nasdaq composite dropped 2.9 per cent, while the Dow Jones Industrial Average lost 572 points, or 1.1 per cent.
Australian sharemarket futures pointed to a fall of four points at the open, while the Australian dollar was trading at US70.29¢.
Intel led the retreat, plunging 28.6 per cent in its steepest decline since 1974. The chipmaker forecast fourth-quarter profit below analysts’ expectations, despite reporting stronger-than-expected earnings for the latest quarter, as chief executive Lip-Bu Tan said the personal-computer industry remained under pressure.
Amazon fell 1.4 per cent after reporting weaker-than-expected summer profit. Investors also focused on its free cash flow, which stood at negative US$42.4 billion over the previous 12 months, while spending on property and equipment reached US$94.8 billion, largely because of investment in artificial intelligence.
Alphabet, the parent company of Google and YouTube, suffered a record one-day fall of more than 12 per cent a day earlier after reporting that its cash outflow had increased during the summer. The company has also been committing heavily to artificial intelligence.
Nvidia, which has become the leading symbol of the AI investment boom, fell 4.2 per cent and was the biggest drag on the S&P 500. Concerns have also grown that high interest rates could slow the expansion of data centres, affecting chipmakers and other companies that have benefited from the build-out.
“We’re moving out of the hopes and dreams phase of the AI trade and into the ‘show me’ phase,” Joe Tigay, a portfolio manager at Equity Armor Investments, said in a note to investors.
The stock market remains just 3.1 per cent below its record high, supporting the value of workers’ retirement accounts. But it has become more unsettled as the United States approaches Tuesday’s midterm elections, with concerns about artificial intelligence emerging among voters across political parties.
Outside technology, several companies gained after reporting better-than-expected results. ExxonMobil rose 2.2 per cent and Chevron added 1.8 per cent, while Mondelez International, the maker of Oreo and Ritz crackers, climbed 3.9 per cent. Colgate-Palmolive advanced 2.3 per cent after higher prices helped lift revenue and profit.
Binance withdrawals surge after cryptocurrency hack
Cryptocurrency-related stocks also fell after a hack at Binance, the world’s largest crypto exchange. Bitcoin dropped below US$77,000, having traded above US$86,000 earlier this month.
A US-based blockchain intelligence firm said a North Korean unit was likely responsible for the attack, which affected more than US$6 billion of cryptocurrency. Coinbase Global fell 10.6 per cent despite reporting stronger-than-expected quarterly results, while Strategy declined 7.8 per cent.
Binance customers withdrew US$3.64 billion, equivalent to 2.1 per cent of the exchange’s assets, after the platform returned online on Sunday. The exchange said withdrawals were stabilising, deposit volumes remained “substantial” and it had covered 95 per cent of the US$6.3 billion in stolen assets.
Investors moved towards safer assets, pushing the yield on the 10-year US Treasury note down to 4.93 per cent from 4.98 per cent. Brent crude rose 2.4 per cent to US$113.43 a barrel.
The S&P 500 fell 140.32 points to 7,580.07, the Dow dropped 572.25 points to 51,770.31 and the Nasdaq composite shed 747.73 points to 25,437.00.
Markets were mixed overseas after sharper falls in Asia. South Korea’s Kospi fell 3.5 per cent, Hong Kong’s Hang Seng gained 1.5 per cent and Japan’s Nikkei 225 lost 2.1 per cent after the Bank of Japan kept interest rates unchanged.
