Oct 30 (Reuters) - Nasdaq futures slid more than 2% on Friday after Amazon's plans for continued heavy AI spending and Intel's warning of cash burn this year deepened investor concerns about escalating costs of AI infrastructure buildout and the timeline for returns.
Shares of Amazon.com (AMZN.O), were down 6.3% in premarket trading after the company reported a sharp cash outflow in the third quarter and signaled another increase in capital expenditure next year, on top of already elevated outlays.
Intel (INTC.O), tanked more than 25% after the chipmaker warned it would burn cash this year due to a weak market for personal computers, manufacturing bottlenecks and heavy spending to expand production.
Amazon and Intel were set to wipe out about $300 billion in combined market value, if losses hold, putting the Nasdaq-100 (.NDX), on track to erase roughly $950 billion. That would add to the index's close to $1.4 trillion loss in market value so far this month.
"If we summarize the Big Tech results: cloud growth was strong, but the companies are spending huge amounts to deliver that growth. Together, Amazon, Google, Microsoft and Meta spent more than $200bn in the third quarter alone," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
"Moving forward, the risk is that higher financing costs will absorb more of the cash generated, leaving less to fund expansion and repay debt."
Several companies have tapped the bond market to fund their hefty AI investments, fueling concerns that higher borrowing costs could make such spending harder to justify.
Alphabet (GOOGL.O), slipped 0.6%, extending losses after a record selloff in the previous session when the Google parent reported disappointing results in its search-advertising business and a sharp increase in cash outflows.
Meta (META.O), also reported cash burn in the September quarter, while Microsoft (MSFT.O), stood out by delivering a big cash-flow beat even as it raised $25 billion through a debt sale.
The broader semiconductor space was under pressure, with Nvidia (NVDA.O), down 3% and AMD (AMD.O), sliding 8.7%.
Energy giants Chevron (CVX.N), and Exxon Mobil (XOM.N), rose 1.5% each, after reporting third-quarter profits above estimates.
At 07:14 a.m. ET, Dow E-minis were up 88 points, or 0.17%, S&P 500 E-minis were down 79.5 points, or 1.03%, and Nasdaq 100 E-minis were down 713 points, or 2.41%.
The S&P 500 (.SPX), and the Nasdaq (.IXIC), were on course for weekly gains, as the AI trade got a brief reprieve earlier this week when Anthropic unveiled its US IPO filing.
The Nasdaq, however, was set to break a two-month winning streak in October, while the S&P 500 and Dow (.DJI), remained on track for gains.
Nine of the 11 S&P 500 sectors were set for monthly gains, barring communication services (.SPLRCL), which was headed for its worst month since April 2022, and technology (.SPLRCT).
The concerns around AI spending coincide with expectations that the Federal Reserve would raise interest rates by more than 50 basis points by mid-2027, according to LSEG data, even after the central bank held rates steady earlier this week, as expected.
Analysts largely viewed the decision as a "pause", with many expecting the Fed to resume tightening as soon as December.
Among other movers, social media platform Reddit (RDDT.N), slid 19.5% after CEO Steve Huffman warned that total daily active unique visitors could fall by a low double-digit percentage in the fourth quarter.
Reporting by Shashwat Chauhan and Tharuniyaa Lakshmi in Bengaluru; Editing by Sherry Jacob-Phillips and Shilpi Majumdar
