Tech stocks sell-off: what Google’s and Intel’s crash means for regular people

Big tech had a rough end to October. Within two days, Alphabet (Google’s parent) had its worst day ever and Intel had its worst day in about 50 years. The common thread was worry that the AI boom is costing more than it is earning. Here is what happened, in plain language, and what it may mean for you.

What happened?

• October 29, Alphabet: shares fell by more than 11%, their worst day on record. Some reports put the lost market value at roughly $500 billion. Google said its search revenue growth slowed, partly because AI searches earn less than traditional ones, and that it spent more cash on AI.
• October 30, Intel: shares dropped about 28% to 29%, the company’s worst day since 1974. Intel reported a better-than-expected profit but gave a weaker forecast and warned of a softer PC market while increasing AI spending.
• Amazon: its latest results added to worries about how much companies are spending on AI.
• The wider market: the S&P 500 fell 1.8%, its worst day since June, and ended a third straight losing week. The tech-heavy Nasdaq fell by more, roughly 3%.

Why are investors worried about AI?

Tech giants are spending enormous sums on AI chips and data centers. Meta and Alphabet’s latest results showed that once lightly indebted companies are turning into heavy spenders that rely on borrowing, according to Reuters. Investors are asking when this spending will turn into profit. If AI products make less money than hoped, share prices that assumed fast growth can drop quickly.

Intel’s case was a bit different. The company said weaker PC demand and higher costs are squeezing it, and rising memory prices are part of the pressure on PC makers. See our report on the memory chip shortage.

What does this mean for regular people?

1. Your retirement and investment funds. A handful of tech giants make up a big share of popular index funds, so when they fall, many people’s savings dip too.
2. The price of gadgets. Weaker PC demand and expensive memory could keep prices high. Read our guide on whether to buy a laptop now or wait.
3. AI products. Companies may focus more on making their AI services profitable, which could mean changes to pricing and limits. That is a possibility, not something these companies have announced.

Should you panic?

History shows that sharp one- or two-day drops are common and often partly recover, but they can also be the start of a longer decline. Nobody can predict which. This article is general information and not financial advice, so if you are worried about your investments, consider speaking to a licensed financial adviser. Some general points many advisers raise:

• Avoid selling in a panic if your plan is long term.
• Check that your savings are spread across different types of investments, not only tech.
• Don’t borrow money to invest.
• Keep an emergency fund so you are never forced to sell during a downturn.

What to watch next

More tech earnings will show whether AI spending is paying off. Apple reports this week, so see our Apple earnings preview for what to look for.

Frequently asked questions

Why did Google’s stock crash?

On October 29, Alphabet fell more than 11%, its worst day on record, after saying search revenue growth slowed and that it was spending heavily on AI.

Why did Intel stock fall so much?

Intel dropped about 28% to 29% on October 30 after giving a weaker forecast and warning of softer PC demand, despite a better-than-expected quarterly profit.

Is this an AI bubble?

Analysts disagree. Some say spending is racing ahead of revenue, while others say AI demand is real and growing. The sell-off shows investors are asking harder questions.

Will this affect my savings?

If you own index funds, you likely hold shares in these companies and may see a dip. Long-term investors often stay the course, but speak to a licensed adviser about your own situation.

Sources

• Wall Street drops to worst day since June after tech stocks sell-off deepens (ABC News)
• Semiconductor stocks fall as Intel earnings trigger broad tech selloff (Morningstar/Dow Jones)
• Wall Street tumbles to its worst day since June (AP via AJC)
• Intel on course for worst day ever, triggers global chip rout (Reuters via The Standard)
• Asian trading is mixed as worries about AI-related issues grow (AP)