Stocks fall on AI cash burn worries while bonds rally with oil
SPY•MSCI's global stock index fell 1.38% and the Nasdaq dropped 2.61% as investors worried about cash-burning AI investments. The 10-year Treasury yield fell 4.36 basis points to 4.945%, while U.S. crude rose 2% to $104.09 a barrel.
1. Tech shares slide
A sharp selloff in Wall Street technology shares pushed MSCI's global stock index down 1.38% by early U.S. afternoon on Friday, while the Nasdaq fell 2.61%. Intel shares plunged 28% and Amazon shares fell 1.9% after results showed both companies burned cash while investing heavily in AI. Intel also said slower PC demand could persist through next year.
2. Investors question AI spending
Alphabet shares extended losses after falling 12.6% on Thursday; its AI spending had turned cash flow negative while its search business faced stiff competition. Cetera chief investment officer Gene Goldman said heavy cash burn and elevated capital spending were prompting questions about whether AI returns would justify the outlays.
3. Bonds and oil rise
Investors sought safety in U.S. Treasuries, with the 10-year yield down 4.36 basis points to 4.945%. Oil prices rose as traders watched supply risks and the conflict involving the U.S. and Iran; U.S. crude gained 2% to $104.09 a barrel. Energy shares also rose, with Exxon Mobil up 1.3% and Chevron up 3% after reporting strong profits.
