Tech stocks fell sharply for a second straight day on Friday, pressured by both concerns over AI spending and weakness in the core businesses of major technology companies.
The Nasdaq 100 dropped 3.5%, marking its worst monthly performance since March 2025, and at one point fell 4.45% during the session, briefly slipping below the threshold for a technical correction.
Investors are showing less patience with technology companies, especially as their traditional businesses weaken while they plan massive capital expenditures.
Results from Alphabet Inc. and Amazon intensified market concerns that the technologies these companies are betting on may be cannibalizing their core operations.
Amazon shares fell 1.4% as AI-related spending plans and a sluggish e-commerce business overshadowed solid growth in its cloud unit.
The earnings dragged down all of the Magnificent Seven technology giants.
Intel shares plunged 29%, posting their largest single-day decline in history.
The company's quarterly revenue outlook fell short of analyst expectations, hurt by weak demand for personal computer processors and supply chain issues in its highly profitable data center components.
AMD and Nvidia fell 11% and 4.2% respectively, while PC maker Dell Technologies dropped 11%.
The Philadelphia Semiconductor Index declined 7.2%, falling below its 200-day moving average for the first time since June 2025.
"The bigger question now is whether the weakness in tech stocks will spread to the broader market, or whether funds will continue to rotate between different sectors?" BTIG chief market technician Jonathan Krinsky wrote in a report.
Aside from the communication services and information technology sectors, all other S&P 500 sectors have risen this month.
But technology stocks carry a high weighting in major indexes and could weigh on the broader market, especially with US midterm elections approaching next week.
"If the major indexes start to decline, investors may choose to move to cash rather than rotate into other sectors," said Matt Maley, chief market strategist at Miller Tabak & Co.
At the close, the S&P 500 fell 1.8% to 7,580.07. The Dow Jones Industrial Average dropped 1.1% to 51,770.31. The Nasdaq Composite declined 2.9% to 25,437. The Nasdaq 100 fell 3.5% to 28,384.85. The Russell 2000 dropped 1.7% to 2,811.844.
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