Amazon, Intel earnings heighten AI cost worries as tech shares slip

After-hours moves pointed to a soft open for Nasdaq futures in Asia, where semiconductor and AI infrastructure companies are most exposed in regional trading, including Asian chip and hardware suppliers. The financing angle could carry more weight than the earnings shortfalls. Rising debt issuance among Big Tech and strain on leveraged AI cloud firms are directly tied to worries about tighter financial conditions and credit supply for AI. If the sell-off intensifies, investors may rotate into AI-chip leaders seen by analysts as less dependent on PCs rather than exiting the sector altogether.

Earlier:

• Amazon's third-quarter operating profit beat estimates, but EPS fell short and Q4 guidance looks soft; the share price dropped.
• Intel topped third-quarter profit expectations, while weak Q4 guidance and the PC outlook weighed; shares declined.
• Intel shares slid roughly 15%; the takeaway is weak Q4 guidance masking a Q3 profit beat.
• Earnings rout: Intel plunged more than 22%, Amazon more than 12%. What happens next?

The artificial-intelligence build-out is now presenting its bill to everyone, hitting Big Tech balance sheets and consumers paying more for their next laptop.

Summary:

• Amazon dropped roughly 7% in extended trading after its holiday-quarter sales guidance fell short of forecasts.
• Intel slid about 18% because of soft PC demand and revealed a $600 million revenue blow from an explosion at an Israel plant.
• AI cloud names CoreWeave, Nebius and Iren were down 6% to 7%; HP and Dell fell about 8% and 7%, respectively.
• Alphabet and Meta each consumed cash in the September quarter, while Microsoft sold $25 billion of debt.
• Intel's PC problems may not necessarily indicate difficulties for AI-focused chipmakers, some analysts say.
• The semiconductor index trades 21% under its June record even with a more-than-60% gain this year.

Worries about the price of the AI boom sharpened after Thursday's close on Wall Street, according to Reuters. The Amazon and Intel figures indicated that the push to build AI infrastructure is straining both technology firms and consumers.

Amazon's stock slid about 7% after the bell when its outlook for holiday-quarter sales came in under Wall Street's expectations. Reuters reported that might indicate rising strain on shoppers as inflation accelerates. Intel tumbled roughly 18% after pointing to near-term softness throughout the PC sector, where scarce memory chips have lifted prices and increases are dampening device demand.

The declines extended well past those two firms. After hours, AI cloud providers CoreWeave, Nebius and Iren each retreated about 6% to 7%. Alphabet, already down nearly 13% at the close after its own numbers, eased another 1.5%. HP and Dell, the PC manufacturers, fell around 8% and 7%, respectively. AMD slid 4% and Broadcom 2% among chip names. An ETF with three times the daily exposure to the Philadelphia Semiconductor Index lost 9%.

Reuters drew attention to a wider change in how the biggest tech companies finance their outlays. Large-scale data-center investment has made major borrowers of companies that once carried little debt. Alphabet and Meta each posted cash burn in the September quarter. Microsoft, the lone exception among them, sold $25 billion of debt on Thursday. The largest firms can absorb that level of spending, though investors have become more wary of smaller AI cloud operators that rely heavily on debt to fill big order backlogs.

Intel also revealed that a blast at an Israeli factory caused a two-week stoppage. The company expects the loss of revenue from the incident to total about $600 million across two quarters.

Intel's PC difficulties are not universally viewed as a danger sign for the broader industry. In some analysts' view, softness in personal computers does not necessarily indicate trouble for semiconductor companies more aligned with AI. One trader ascribed most of the after-hours selling in chips to mood carried over from Intel's forecasts.

The semiconductor index has climbed more than 60% this year, helped by shortages of AI-related chips and gear, yet tighter financing conditions have put that rally to the test in the last month. The gauge is off 13% from its October peak and 21% under its June record.