Nasdaq lags on angst over AI spending ahead of earnings reports

The S&P 500 barely advanced and its biggest weight came from the S&P 500 technology index, which underperformed the broader market to finish down 0.88 per cent, as chip stocks fell.

NEW YORK - The tech-heavy Nasdaq fell on July 24 as investors sold chip stocks on worries about massive spending on artificial intelligence ahead of the next batch of megacap earnings reports, while falling oil prices provided Wall Street with some support even as Middle East hostilities continued.

The S&P 500 barely advanced and its biggest weight came from the S&P 500 technology index, which underperformed the broader market to finish down 0.88 per cent, as chip stocks fell.

While investors looked ahead to next week’s results from megacaps Microsoft, Amazon.com, Meta and Apple Inc, their enthusiasm has waned since Alphabet’s announcement, late on July 22, of a massive hike to its capital spending plans even as it burns cash.

After piling into technology stocks in recent years on the promise of growth from AI, investors have become worried about the need for ever-increasing capital outlays for AI, according to Andersen Capital Management chief executive officer Peter Andersen.

“People are thinking, how do we make sense of all this spending, and how much more patient do we have to be before we actually see it translate to actual profits?“ Andersen said.

Late on July 23, Intel forecast quarterly profit and revenue above Wall Street estimates and outlined plans to increase spending over the next two years. Still, the chipmaker’s shares sank to close down 7.9 per cent on July 24 in sympathy with the Philadelphia SE Semiconductor index, which dropped 4.5 per cent.

The Dow Jones Industrial Average rose 235.60 points, or 0.46 per cent, to 51,947.25, the S&P 500 gained 3.68 points, or 0.05 per cent, to 7,411.98 and the Nasdaq Composite lost 161.87 points, or 0.64 per cent, to 24,975.82.

For the week, the Dow fell 0.4 per cent, its third straight weekly loss. The S&P 500 and the Nasdaq registered their second straight week in the red with the S&P falling 0.6 per cent while the Nasdaq lost 2 per cent.

Among the S&P 500‘s 11 major industry indexes, real estate was the strongest, with a 2.4 per cent advance.

The sector’s leading gainer was Digital Realty Trust, which rallied 11 per cent after it raised its full-year forecast for funds from operations. The second-biggest sector gainer was materials which rose 1.44 per cent as investors turned their attention to paper and packaging companies.

International Paper led the pack with an 11.2 per cent advance, making it the S&P 500‘s biggest percentage gainer on the day. It was followed closely by the US-traded shares of paper company Smurfit Westrock, which added 11.1 per cent.