Tech Earnings Rout Triggers AI Spending Reckoning as Nasdaq Plunges 2%

What’s happening

Amazon fell 7% and Intel plunged 25% in premarket trading after disappointing earnings reports, dragging the Nasdaq down more than 2% and triggering a broader selloff in mega-cap tech stocks. Alphabet also missed expectations, with Wall Street citing weaker-than-expected revenue from its core search business as evidence that AI competition is eroding traditional ad models. The earnings misses have renewed investor concerns about whether massive AI infrastructure spending will generate sufficient returns.

Market impact

The selloff signals a potential inflection point in the AI trade narrative. Investors are now pricing in the risk that trillion-dollar capex commitments from Amazon, Google, and Meta may not translate to near-term revenue growth or margin expansion. Semiconductor stocks face particular pressure as demand forecasts for AI chips are revised downward. Defensive sectors and lower-growth tech names are gaining relative strength as rotation accelerates.

Broader implications

This marks the first sustained challenge to the AI bull thesis since the generative AI boom began. If earnings disappointments persist across the mega-cap cohort, it could force a fundamental reassessment of AI capex productivity and trigger broader multiple compression in growth equities. The outcome will shape whether AI remains a structural growth driver or becomes a cautionary tale about capital allocation discipline.