Major tech giants including Amazon, Alphabet, and Intel faced a severe Wall Street selloff as investors demanded tangible earnings and scrutinized massive artificial intelligence infrastructure spending, while Microsoft emerged as a rare outlier with proven AI revenue growth.

Major tech giants including Amazon, Alphabet, and Intel faced a severe Wall Street selloff as investors demanded tangible earnings and scrutinized massive artificial intelligence infrastructure spending, while Microsoft emerged as a rare outlier with proven AI revenue growth.

Major tech giants including Amazon, Alphabet, and Intel faced a severe Wall Street selloff as investors demanded tangible earnings and scrutinized massive artificial intelligence infrastructure spending, while Microsoft emerged as a rare outlier with proven AI revenue growth.

Google (Alphabet), Amazon, Intel, Meta and assorted AI courtship firms are finally seeing red after investors showed them that earnings matter. AI costs were the major culprit in Thursday's Wall Street selloff that hit cloud, chipmaker, and AI stocks alike.

With data centre costs weighing heavily on the P&L statement, as seen in Amazon's results, tech giants once heralded as safe bets for being light on debt have become heavy borrowers.

While a chunk of this debt went into AI technology and its auxiliary functions, it also drove prices up for basic consumer-end RAM and SSDs—which are anyway incompatible with AI data centre infrastructure—and that led to a marked slump in demand for PCs and smartphones.

Intel's PC business took a major hit with the chip shortage driving up costs. Alphabet, Meta, and Amazon now see the unabashed spending on AI being reflected in their cash flows.

Google parent Alphabet dropped 13 per cent on Thursday, triggering a massive sell-off wiping billions of dollars from the US markets.

Microsoft becomes outlier

In almost poetic fashion, Microsoft has emerged as the conscious giant—yes, the same firm trying to peddle us Bing, Copilot AI, and Edge for the past few years—because it delivered some crackling earnings that beat Street expectations on two counts. In fact, Microsoft was the one giant that gave investors some clear proof that its massive AI investments were actively translating into revenue and profit.

Gemini seems to have cannibalised its parent Google, since Alphabet posted slower growth and missed earnings estimates. In contrast, Microsoft one-upped its peers by pricing a massive $25 billion debt sale on Thursday—its first major entry into the US investment-grade bond market since 2017.

While investors saw the red flag in artificial intelligence spending by other tech giants, Microsoft tapped the debt markets to fund its aggressive AI infrastructure buildout and data centre expansions. Microsoft's AAA credit rating also made the whole thing lucrative, with the offering attracting a peak of $115 billion in orders. In short, investor demand was more than four times oversubscribed, thus becoming one of the most sought-after corporate bond sales in history.

Investors are also now scrutinising smaller AI cloud companies, like CoreWeave, Nebius, and Iren, which slumped 5.5–6.5 per cent after-hours on Wall Street along with the 7 per cent Amazon slide.

Intel calling kettle black

"Near-term headwinds across the PC industry," Intel zeroed in on as the culprit of its current state. Funnily enough, many PC retail experts blame the current market on chipmakers like Intel and the semiconductor triumvirate of Micron, Samsung, and SK Hynix. In fact, the "Big Three" memory manufacturers are now at the centre of a class-action lawsuit that alleges they have been using the AI boom to artificially restrict supply and gouge prices.

Tech and semiconductor firms have also lost a lot of goodwill in the market. "The lawsuit talks about these firms using High Bandwidth Memory (HBM) demand like a shield. HBM takes 3 to 4 times more physical wafer capacity than standard DRAM, and the lawsuit alleges these three intentionally over-allocated production to HBM to starve the consumer market, driving consumer RAM costs up by many times," said a hardware retail expert handling South Kerala sales, who requested not to be identified.

The hardware rout also extended to other PC makers too. HP slumped 8 per cent, Dell slipped 6.8 per cent after-market. Lower PC demand is the key reason, these firms revealed. "First, they saw AI is hiking the price of hardware. Now they blame consumers for not buying their overpriced systems," said Raman G., a 23-year-old graphic design student from Indore.

Unlike HP and Dell, firms such as AMD, Broadcom did not get hit much in regular market hours, but their extended after-market losses were quite the bloodshed. AMD fell an additional 6 per cent, Broadcom more than 2.5 per cent.

TAGS