Nasdaq Plunges 2% as Amazon and Intel Earnings Trigger AI Spending Reckoning

What’s happening

The Nasdaq fell more than 600 points Friday as Amazon and Intel reported disappointing earnings, with Intel shares plunging 25% in premarket trading. Investors are now questioning whether the massive capital expenditures tech giants are pouring into AI infrastructure will generate sufficient returns, unraveling the narrative that has driven the sector's 2024 rally.

Market impact

The selloff signals a potential rotation away from mega-cap AI beneficiaries toward value and dividend-paying sectors. Amazon's 7% decline and Intel's 25% drop will pressure semiconductor supply chains and cloud computing valuations; broader tech indices face headwinds if earnings misses persist across the AI infrastructure complex.

Broader implications

This marks the first material test of whether AI capex spending justifies valuations that have already priced in years of productivity gains. A sustained earnings miss cycle could force a fundamental repricing of the entire AI trade and expose which companies have genuine competitive moats versus those riding hype.