Intel Plunges 25%, Amazon Falls 7% as AI Spending Weighs on Tech Earnings

Intel shares plunged 25% in premarket trading on Friday, and Amazon fell 7%, after both companies reported September-quarter results that disappointed investors and dragged Nasdaq futures down 2%.

The declines cap one of the roughest weeks for technology earnings this year. They follow Alphabet's 13% single-day drop on Thursday, the worst in that company's history, and they arrive as investors question whether the massive artificial intelligence spending programs at the largest technology companies will pay off.

What did Amazon and Intel report?

Amazon missed Wall Street's expectations for the third quarter on both the top and bottom line. The company maintained its capital expenditure forecast of $220 billion for 2026, a figure that signals no retreat from its infrastructure buildout even as costs mount.

Amazon also reported negative free cash flow for the second consecutive quarter. The shortfall was much larger than in the previous period, a deterioration that deepened investor concern about the cash cost of the company's expansion.

Intel's problem was different. The chipmaker issued weaker-than-expected guidance, citing ongoing softness in the PC market. The 25% premarket decline reflects the severity of that outlook relative to what analysts had modeled.

The two reports landed within hours of each other, and together they amplified a selloff that had already gathered force across the sector.

How far is the selloff spreading?

The damage extended well beyond the two companies that reported. Chip stocks including Micron, Nvidia and Arm traded lower in premarket action in the United States. Major European semiconductor names, including ASML, saw sharp declines.

Nasdaq-100 futures fell 2% in early trading. That move threatened to push the tech-heavy index into negative territory for the week.

The pressure is not uniform across the sector, however. Microsoft shares rose after the company remained cash flow positive in the September quarter, a contrast that investors appeared to reward. The divergence between Microsoft and its peers underscores that the market is now distinguishing between companies that can fund AI investment from operating cash and those that cannot.

Even after the recent fall, the Nasdaq Composite index was up more than 12% year-to-date as of Thursday's close. The correction, in other words, is eating into gains rather than erasing them.

Why are investors focused on free cash flow?

The throughline of the week is negative free cash flow. Alphabet shares closed 13% lower on Thursday, the worst single-day drop in the company's history, after it too reported ballooning negative free cash flow. Amazon's second consecutive quarter of negative free cash flow fits the same pattern.

Free cash flow has become the market's preferred lens for judging the AI investment cycle. Capital expenditure at the largest technology companies has scaled to hundreds of billions of dollars annually, and investors now want evidence that the spending will generate returns rather than merely expand capacity.

Amazon's $220 billion capital expenditure forecast for 2026 is the concrete number anchoring that debate. The company held the forecast steady even as its cash flow turned negative, a decision that signals management conviction but that investors weighed against the miss on revenue and profit.

What are strategists saying?

Matt Orton, chief market strategist at Raymond James, told CNBC's "Squawk Box Europe" on Friday that the selloff does not mark a turning point for the sector.

"I don't think this is a moment of reckoning but I think it's a moment where investors should take a long thought about how positioning across the space still remains crowded even though the fundamentals are strong," Orton said.

He argued that the underlying businesses remain sound despite the near-term pain in share prices.

"While the here and now can be painful … the fact of the matter is the fundamentals by and large still remain in place, especially across the AI capex beneficiary part of the market," Orton said.

On the specific question of negative free cash flow, Orton said he is "generally okay" with these companies turning free cash flow negative because he expects it to last only a "temporary period." That view — that the cash burn is a phase rather than a structural problem — is the bull case that the market will now test.

What happens next?

The immediate question is how the indexes close the week. A 2% decline in Nasdaq-100 futures points to a lower open, and the week's cumulative losses across Alphabet, Amazon, Intel and the semiconductor supply chain could push the tech-heavy index negative for the period.

The longer-term question is whether the divergence widens. Microsoft's cash-flow-positive quarter and rising shares against Alphabet's record drop and Amazon's deepening cash burn suggest the market has begun to sort the sector by balance sheet strength rather than by AI ambition alone. Orton's assessment — crowded positioning, strong fundamentals — frames the bet: investors who accept his "temporary period" thesis are buying the dip, and those who do not are repricing the entire AI capex trade.