By Sinéad Carew and Iain Withers
NEW YORK/LONDON, Oct 30 (Reuters) – A sharp decline in technology stocks on Wall Street sent the MSCI world index down more than 1% on Friday, sending investors back to the safety of U.S. bonds on concerns that large, cash-burning investments in AI may not produce sufficient returns.
Shares of chipmaker Intel plunged 28% and Amazon’s shares fell 1.9% after their results showed they burned through cash while investing heavily in AI-related development. Intel also said PC demand has slowed and could persist into next year.
Shares of Google parent Alphabet, after falling 12.6% on Thursday, extended their losses on Friday. Its massive spending on AI turned the company’s cash flow negative while its research business faced fierce competition.
“It really has been a horror show this morning and the real villain is AI spending,” said Gene Goldman, chief investment officer at Cetera, saying the heavy cash burn and increased investments raise questions about whether AI returns will “justify the spending.”
Goldman also said pressure from rising oil prices due to new attacks in the Middle East and concerns about a hack of Binance, the world’s largest cryptocurrency exchange, added to the gloom. The prices of Bitcoinand other cryptocurrencies have fallen.
Apart from technology, other sectors are resisting, notably energy, which is progressing following the results of Exxon Mobil and Chevron. Oil majors posted strong profits due to large refining margins due to supply disruptions due to Ukrainian attacks on Russian refineries and the US-Israeli war against Iran. Shares rose 1.3% and 3%, respectively.
On Wall Street at 12:09 p.m. ET (4:09 p.m. GMT), the Dow Jones Industrial Average fell 384.61 points, or 0.73 percent, to 51,957.95, the S&P 500 fell 124.20 points, or 1.61 percent, to 7,595.93 and the Nasdaq Composite fell 684.06 points, or 2.61%, to 7,595.93. 25,500.67.
MSCI’s index of stocks across the world fell 15.62 points, or 1.4 percent, to 1,117.00.
The pan-European STOXX 600 index fell by 0.46%.
In currencies, the yen headed for a third daily gain on Friday after the Bank of Japan kept rates steady but revised upward its inflation forecasts, while a fresh round of selling in AI stocks sparked demand for safe havens other than the dollar.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.03% to 101.85, with the euro down 0.07% to $1.117.
Against the Japanese yen, the dollar weakened 0.2% to 157.37.
Bitcoin fell 1.80% to $77,424.37.
U.S. Treasuries rose, putting benchmark 10-year yields on track for their biggest monthly decline since late 2023, as a selloff in tech stocks pushed investors toward safe havens.
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