AI returns in doubt as tech stocks are crushed and Nasdaq tumbles 600 points

Nasdaq falls after earnings reports

The Nasdaq Composite Index dropped 610 points, or 2.3%, during early trading on Friday. The declines followed disappointing earnings reports from Alphabet, Amazon and Intel. The results renewed fears about the prospects for artificial intelligence. The tech companies’ reports added to pressure on investors weighing the outlook for the sector.

Analyst calls season unusually weak

Adam Crisafulli, head of Vital Knowledge, described the earnings season as among the worst in memory. In a research note, he pointed to underwhelming results from several prominent companies.

Weaker-than-expected tech earnings have raised questions about whether major AI investments will produce the payoff Wall Street anticipates. The worries extend beyond company results to the financing behind those investments.

Debt and concentration concerns grow

Investors are concerned about the debt companies are taking on to pay for data center capital expenditures. They are also questioning whether that debt can be sustained. The commentary supported a constructive long-term view of AI’s structural growth while warning that high expectations and differing company outcomes create risks for investors concentrated in individual stocks. It also urged broadly diversified equity portfolios.