Technology shares fell sharply around the world on Friday, 30 October, as investors worried that the huge sums big tech companies are spending on artificial intelligence may not bring enough profit back soon enough. Shares in Asia dropped first, European shares followed lower, and trading pointed to further falls on Wall Street later in the day.
The largest tech companies — often called hyperscalers, because they run enormous data centres — are spending hundreds of billions of dollars building the computers and buildings needed for AI. Investors now want clearer proof that this spending will earn its keep.
A $500 billion fall at Google’s parent company
The sharpest shock came from Alphabet, the parent company of Google. Its shares fell 12.6 percent on Thursday in the United States, wiping about $500 billion off its market value — the total worth of all its shares — in a single day. That took its value down from about $3.97 trillion to about $3.46 trillion, the second-largest one-day loss ever recorded for a single company.
At first glance, Alphabet’s results did not look weak. Total revenue — all the money coming in from sales — rose 25 percent to $127.6 billion, and its cloud business more than doubled to almost $31 billion. But profit fell 25 percent, and free cash flow — money left after daily operations and investments — turned negative by more than $9 billion. In simple terms, the company spent more than it brought in, for only the second time since it became a public company.
Investors were also troubled by Google Search, still Alphabet’s main money-maker. Search revenue grew 12 percent, missing expectations by almost three percentage points, as its AI summaries reduce the adverts people click on. Alphabet expects an investment bill of about $205 billion this year alone.
The sell-off spreads, and safer assets gain
Alphabet was not alone. Amazon shares fell 6 to 7 percent in after-hours trading after it reported heavy spending, and Intel shares plunged about 23 percent after its own results. In Asia, South Korea’s KOSPI index and Japan’s Nikkei index both fell sharply, led by chipmakers, and China’s blue-chip CSI300 index headed for its largest monthly fall in a decade. Europe’s main share index fell more modestly, partly because it has fewer giant tech companies.
Investors also moved into safer assets: government bonds rallied toward their biggest monthly gain in nearly three years, and the Japanese yen strengthened.
What it means for Pakistan
For Pakistani readers, this is not just a Wall Street story. When big investors turn cautious, money often becomes more careful about emerging markets too, and Pakistan’s own market has already had a volatile week, closing near flat on Friday.
The more direct effect is on prices at home. Dear phones, laptops and computer parts would raise Pakistan’s import bill, and for Pakistan’s IT services exporters, whose customers are the very companies now questioning spending, a longer tech downturn could mean slower orders. None of this is a reason to panic or to rush into buying or selling shares — the AI boom is now being judged on profits, not promises.
Sources: Reuters, BBC. Written in our own words for information only — not investment advice.