US STOCKS-Nasdaq hits near three-month low as Amazon, Intel rattle AI trade

The Nasdaq fell to its lowest in nearly three ‌months ​on Friday after Amazon's aggressive AI spending plans and Intel's cash-burn warning heightened concerns over soaring AI buildout costs and the timeline for returns. After paring most of its premarket declines, Amazon.com was down 2%. The company reported a sharp cash outflow in the third quarter and signaled ‌another increase in capital expenditure next year.

Intel was set for its steepest one-day drop on record with a near 29% slide after the chipmaker said it would burn cash this year due to a weak PC market, manufacturing hurdles and heavy spending to expand production. The warning sparked a selloff in global chip stocks, with Nvidia down 3.7% and AMD sliding about 10%. The broader chips index shed ‌7%. Server makers Dell and HP lost 10.4% and 8.7%, respectively.

Amazon and Intel were set to wipe out near $200 billion in combined market value, if losses hold, setting up the ‌Nasdaq-100 to erase just over $1 trillion on Friday. The index is set to shed more than $2 trillion this month. "A lot of them kind of got ahead of themselves. It's all earnings based and right now, they're not producing," said Joe Saluzzi, co-manager of trading at Themis Trading.

"Though it's having a terrible day, Intel is still up significantly this year. It (the decline) doesn't kill the whole story, it's pretty much a reset." The S&P 500 information technology index was the biggest ⁠drag, down ​3.9% and set for its steepest one-day fall since ⁠June 23. The communication services index was headed for its worst month since April 2022.

Alphabet was down marginally, following a record selloff in the previous session after it reported a sharp increase in cash outflows. A $6.3 billion record heist at ⁠Binance, the world's largest cryptocurrency exchange, also dented appetite for crypto-linked and technology stocks. Coinbase was down 13%.

At 11:52 a.m. ET, the Dow Jones Industrial Average fell 373.72 points, or 0.71%, to 51,968.84. The S&P 500 lost ​120.20 points, or 1.56%, to 7,600.19, while the Nasdaq Composite shed 650.77 points, or 2.48%, to 25,533.95. Investors rotated into consumer staples and healthcare indexes, traditionally considered defensive sectors, which ⁠were up 1.6% and 0.7%, respectively. Healthcare also hit a record high.

Energy stocks were supported by a 1.7% and 1.2% gain in Chevron and Exxon Mobil, respectively, after they beat third-quarter profit estimates. Angelo Kourkafas, senior global strategist at Edward Jones, said ⁠the ​rotation was supported by an "above-trend" pace of economic growth and as earnings growth from market sectors that have lagged over the last few years showed improvement.

All three indexes were on course for weekly losses. While the Dow was on track for monthly gains, the Nasdaq was set to snap a two-month winning streak in October. Adding to AI worries, the Federal Reserve is ⁠expected to hike interest rates by over 50 basis points by mid-2027, per LSEG data, potentially making debt-funded spending by companies more difficult to justify.

The central bank held rates this week, ⁠as expected. Among other movers, social media platform Reddit plunged ⁠28% after CEO Steve Huffman warned total daily active unique visitors could fall by a low double-digit percentage in the fourth quarter.

Declining issues outnumbered advancers by a 1.71-to-1 ratio on the NYSE and by 2.85-to-1 on the Nasdaq. The S&P 500 posted 42 new 52-week highs and five ‌new lows, while the Nasdaq Composite ‌recorded 60 new highs and 241 new lows.