Two of the companies most central to the global technology and artificial intelligence buildout delivered results this week that left investors uneasy, and their stocks paid the price.
Intel shares fell sharply in premarket trading, extending a decline that was already shaping up to be one of the chipmaker's worst days on the market in decades, after the company issued a weak forecast for fourth quarter profit along with a warning about its cash flow. Intel has spent the past several years trying to rebuild its position as a leading maker of advanced chips, investing heavily in new factories in the United States, and any sign that the payoff is slower or more expensive than hoped tends to hit the stock hard. Amazon shares fell almost 7 percent before the opening bell after the company missed profit expectations and gave guidance that disappointed investors, even as its cloud computing business, Amazon Web Services, remains one of the primary beneficiaries of corporate AI spending.
The reaction spread well beyond the two companies themselves. Chip infrastructure and AI supply chain names were hit broadly: Arm Holdings fell about 9.6 percent ahead of its own earnings next week, optical networking supplier Lumentum dropped roughly 7 percent, data center operator Applied Digital slid nearly 7 percent, and Dutch lithography equipment maker ASML retreated around 5 percent. The Philadelphia Semiconductor Index, a benchmark for the chip sector, had already fallen 8.7 percent for the month of October heading into Friday.
The underlying worry on Wall Street is straightforward to explain, even if the numbers behind it are enormous. Technology companies have committed hundreds of billions of dollars collectively toward building data centers, buying specialized chips, and training ever larger AI models, on the bet that demand for AI services will keep growing fast enough to justify the cost. Intel's warning about its own cash flow, paired with Amazon's guidance miss, gave investors a reason to ask whether that bet is taking longer to pay off than the market had been pricing in.
Arm Holdings reports earnings next week, which will be closely watched as another test of whether chip demand tied to AI is holding up. Investors will also be watching whether other major cloud providers echo Amazon's cautious tone when they report.
Why did Amazon's cloud business matter to this story?
Amazon Web Services is one of the biggest beneficiaries of corporate AI spending, so investors watch its results closely as a signal of overall AI demand.
What is Intel trying to do with its new factories?
Intel has been investing heavily to rebuild itself as a leading manufacturer of advanced chips, competing to win business making chips for other companies.