A dramatic week in the stock market has left investors with a rollercoaster of emotions. The AI boom has once again sent shockwaves through the market, triggering a wave of selling and raising questions about the future of various industries.
On Friday, the S&P 500 witnessed a remarkable 1.97% surge, its best performance since May, rebounding from a week of intense volatility. The Nasdaq Composite followed suit, soaring by 2.18%. However, beneath this rebound lay a hidden sell-off in many tech stocks.
Amazon, the fifth-largest public company globally, saw its shares plummet by 5.58% on Thursday. The company's announcement of a planned $200 billion expenditure in the coming year sent shockwaves through the market. This money is primarily earmarked for its Amazon Web Services division, the world's largest cloud provider.
Since Monday, Amazon's stock has taken a nosedive, losing a staggering 12% and shedding over $310 billion in market value. But Amazon isn't alone in this fate; Microsoft and Meta, two other tech giants, have also announced massive spending plans for AI, with hundreds of billions of dollars earmarked for this purpose.
Collectively, Amazon, Microsoft, Meta, and Alphabet plan to invest a whopping $650 billion this year to expand their data center and AI capabilities. As a result, these four companies have collectively lost nearly $1 trillion in market value over the last five days.
While the S&P 500 and Nasdaq Composite ended the week in negative territory, there were some notable bright spots. Industrial stocks, such as Caterpillar, and a handful of energy firms soared on expectations that their services would be in high demand for data centers. The industrial and energy sectors of the S&P 500 were among the best performers on Friday, with tech stocks also gaining ground, thanks to chipmakers.
Nvidia, an AI chipmaker, saw its shares boom, rising by nearly 8%. The company is now valued at over $4.5 trillion. Nvidia's CEO, who had previously described the sell-off as "the most illogical thing in the world," reiterated his support for the sector on CNBC on Friday. He justified the high levels of spending by citing the "incredibly high" demand for AI applications.
Apple, the iPhone maker, also experienced a 7% jump this week. The company has largely avoided the recent AI-induced sell-offs because it purchases most of its cloud computing capacity from other firms, rather than building its own data centers.
The turmoil began on Tuesday when AI developer Anthropic announced that AI agents could perform advanced tasks like data analytics. This announcement sparked panic among investors in software companies and firms providing data analysis services across various industries, including real estate, human resources, and banking. The fear that AI agents could disrupt their businesses led to heavy selling in the sector this week.
Private credit firms, which own many of the big software and data companies, also suffered significant losses this week. These firms play a crucial role in helping AI and tech giants raise the enormous amounts of money needed for expansion.
The Dow Jones Industrial Average hit 50,000 for the first time ever on Friday. While this milestone drew attention, it's important to note that the Dow contains only 30 stocks, making it a relatively poor indicator of overall market strength compared to an index like the S&P 500.
President Donald Trump celebrated this milestone on Truth Social, posting, "CONGRATULATIONS AMERICA!" However, for the year, the more representative S&P 500 has seen an increase of less than 1%.
Meanwhile, the value of Bitcoin experienced wild swings, fluctuating by nearly $10,000 in the last 24 hours. The token plunged to almost $60,000 late on Thursday night but rebounded to over $70,000 by Friday evening.
Crypto assets often behave differently from more traditional assets like stocks and bonds. Paul Donovan, chief economist at UBS Global Wealth Management, wrote on Friday, "Crypto is not an asset, and is held by a tiny portion of society. It is unlikely that consumer behavior will change because of recent market moves."
Small and medium-sized stocks also outperformed their larger peers on Friday, soaring by almost 4% on the Russell 2000 index. Bank of America analysts wrote, "We are long Main St., short Wall St." suggesting that smaller stocks may continue to benefit until Trump's approval rating improves.
Steve Kopack, a senior reporter at NBC News, covers business and the economy.
