Amazon and Intel shares experienced significant declines in Friday's premarket trading after reporting September quarter results that failed to meet investor expectations. The sell-off contributed to a 2% drop in Nasdaq futures, capping a week marked by challenging earnings reports across the technology sector. Amazon stock fell 7%, while Intel saw a steeper plunge of 25%.
Amazon reported misses on both revenue and profit for the third quarter. Despite these results, the company maintained its capital expenditure forecast for 2026 at $220 billion. Additionally, Amazon recorded negative free cash flow for the second consecutive quarter, with the deficit expanding significantly compared to the previous period. Intel issued guidance weaker than anticipated, attributing the outlook to continued softness in the personal computer market.
The downturn extended beyond these two companies, with chip stocks including Micron, Nvidia, and Arm trading lower in U.S. premarket sessions. Major European semiconductor firms, such as ASML, also faced sharp declines. The broader market sentiment reflects investor nervousness regarding the massive AI spending by tech giants and uncertainty over whether these investments will yield returns.
This volatility follows a historic drop for Alphabet on Thursday, whose shares closed 13% lower after reporting ballooning negative free cash flow. In contrast, Microsoft shares rose as the company remained cash flow positive during the September quarter. Nasdaq-100 futures were down 2% in early trading, putting pressure on the tech-heavy index to potentially enter negative territory for the week. Despite recent losses, the Nasdaq Composite remains up more than 12% year-to-date as of Thursday's close.
Matt Orton, chief market strategist at Raymond James, told CNBC's "Squawk Box Europe" that while the current situation is painful, it may not represent a moment of reckoning. He noted that investor positioning across the sector remains crowded despite strong fundamentals. Orton suggested that investors should carefully consider their exposure, adding that he is generally comfortable with companies turning free cash flow negative if it is viewed as a temporary period to support AI capital expenditure beneficiaries.
Sources: CNBC Markets.