Intel shares drop 28% as AI trade wobbles and tech earnings disappoint

Intel shares fell more than 28% on Friday, marking the worst single-stock performance of the week for the CNBC Investing Club portfolio. The drop followed a weak earnings outlook released Thursday evening and capped a turbulent stretch for technology stocks. The Nasdaq Composite index had climbed more than 2% through Wednesday, but it lost 1.4% on Thursday and nearly 3% on Friday. For the week, the tech-heavy index dropped 2%, extending its October loss to 5.3%.

The sharp reversal in chip stocks came after an initial surge. The iShares Semiconductor ETF rose roughly 9% over the first three trading days, buoyed by Anthropic’s IPO filing and record profits from SK Hynix. However, enthusiasm faded as major tech companies reported mixed results. Investors grew concerned about the pace of artificial intelligence spending and the cost of memory, which squeezed margins for personal computer manufacturers. The Federal Reserve added to the pressure. On Wednesday, the central bank held rates steady, but Chairman Kevin Warsh signaled that a rate hike in December is likely, raising worries about high borrowing costs for tech firms building out AI infrastructure.

Reactions among portfolio managers reflected a shift toward financial discipline. Microsoft reported Azure revenue growth of 48%, with capital spending coming in below expectations. The stock fell only 0.5% for the week. In contrast, Alphabet shares plunged 12% on Thursday after the company missed earnings and revenue expectations and reported negative free cash flow. Amazon also missed expectations, with weaker retail and advertising results overshadowing strong growth at Amazon Web Services. The stock lost 3% for the week, though it recovered from intraday lows that were down over 6%.

Money rotated out of tech and into defensive sectors. Eli Lilly, which reported strong demand for its obesity and diabetes drugs, gained more than 11% for the week, making it the second-best performer in the portfolio. FedEx Freight surged nearly 15% on Friday as its first standalone earnings report beat expectations. Healthcare was the best-performing sector overall. Boeing was the third-biggest loser, falling nearly 9% after management pushed back its timeline for reaching $10 billion in annual free cash flow to 2029.

Looking ahead, the market will continue to monitor how companies manage AI-related capital expenditures. Intel’s price target was cut, and its rating was placed under review. Microsoft’s price target was raised to $580. Eli Lilly’s price target increased to $1,500. Boeing’s price target was lowered to $225. The next scheduled event is the Federal Reserve’s interest rate decision in December, which market participants are watching closely for signals on inflation and the pace of tightening.