Stocks fall on AI cash burn worries while bonds rally with oil

By Sinéad Carew and Iain Withers

NEW YORK/LONDON, Oct 30 (Reuters) - A sharp selloff in Wall Street's tech shares pushed MSCI's global index down 1.5% on Friday, sending investors to the safety of US bonds on fears that hefty cash-burning AI investments may not deliver sufficient returns. 

Shares in chipmaker Intel < INTC.O> plunged 28.6% and Amazon shares lost 1.4% after their results each showed that they burned through cash while investing heavily in AI-related development. Intel also said PC demand had slowed, and that it could persist through next year.

Shares in Google parent Alphabet lost another 1.4%, having slid 12.6% on Thursday, after it reported that massive AI spending turned the company's cash flow negative. 

"We've had such a huge move up in the whole complex," said Sahak Manuelian, managing director for global equities sales and trading at Wedbush Securities, referring to AI-related stocks. "When you've had the parabolic-like moves, it makes for a very nasty downdraft. I think that's what we're seeing. And then you have people that are starting to pull money out and going to other areas." 

Earlier, Gene Goldman, chief investment officer at Cetera, described Friday's stock trading as a "horror show" with AI spending being the villain as cash burn and elevated capex prompted questions about whether the AI returns will "justify the outlays." 

Goldman also said pressure from rising oil prices due to more attacks in the Middle East and concerns about a hack at Binance, the world's biggest cryptocurrency exchange, added to the gloom. Bitcoin and other cryptocurrencies fell.

The Dow Jones Industrial Average fell 572.25 points, or 1.09%, to 51,770.31, the S&P 500 fell 140.32 points, or 1.82%, to 7,580.07 and the Nasdaq Composite fell 747.73 points, or 2.86%, to 25,437.00. 

MSCI's gauge of stocks across the globe fell 17.15 points, or 1.51%, to 1,115.47. Earlier, the pan-European STOXX 600 index finished down 0.36%.

On Wall Street, Intel's selloff spread across the chip sector. The PHLX semiconductor index finished down more than 7% after touching its lowest level since May, marking its biggest daily drop since late June. The S&P 500 technology index lost 4.2% in its weakest day since early June.  

Investors looking for safer bets pushed up consumer staples and utilities. But the top performer on the day was energy, which was bolstered by oil's rally and results from Exxon Mobil and Chevron. The oil majors posted strong profits due to big refining margins driven by supply disruptions from Ukrainian attacks on Russian refineries and the Iran war.

In currencies, the yen was headed for its third consecutive daily gain against the dollar on Friday after the Bank of Japan held rates steady but revised up its inflation forecast, while a fresh wave of selling in AI shares triggered demand for non-dollar safe havens.  

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.04% to 101.92, with the euro down 0.13% at $1.1163.

Against the Japanese yen, the dollar weakened 0.1% to 157.54.

In cryptocurrencies, bitcoin fell 2.49% to $76,877.30. Ethereum declined 1.01% to $2,236.76.

US Treasuries rose and the benchmark 10-year yield was eyeing its biggest monthly drop in nearly three years as the selloff in technology-related stocks pushed investors into the safe-haven asset.

The yield on benchmark US 10-year notes fell 5.8 basis points to 4.931% while the 30-year bond yield fell 1.97 basis points to 5.3093%. 

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 6.64 basis points to 4.59%.

Oil prices settled at six-month highs as traders braced for a potential escalation in the Iran war after the US midterm elections on Tuesday. The war has lingered for eight months without a resolution. On Friday, a tanker in the Strait of Hormuz was attacked, highlighting the ongoing supply risks. [O/R]

US crude settled up 2.08%, or $2.12, to $104.12 a barrel. Brent finished at $117.63 per barrel, up 2.4%, or $2.76 a barrel, on the day.

Precious metals fell. Gold dropped to a one-year low on Friday and silver slid below $50 an ounce for the first time since November 2025, as higher energy prices and persistent inflation concerns strengthened expectations that US interest rates will stay high.

Spot gold fell 3.63% to $3,874.58 an ounce and spot silver fell 6.36% to $49.06 an ounce. 

(Reporting by Sinéad Carew in New York, Iain Withers in London and Tom Westbrook and Ankur Banerjee in Singapore; Editing by Tom Hogue, Clarence Fernandez, Stephen Coates, William Maclean, Chizu Nomiyama, Will Dunham and David Gaffen)