The stock market has seen a dramatic turnaround after a tumultuous week, with the S&P 500 experiencing its best day since May, rising by nearly 2%. This rebound follows a period of intense selling, triggered by the ongoing AI boom and its potential impact on various sectors.
The Nasdaq Composite also joined the rally, surging by over 2% on Friday. However, beneath this rebound lies a story of sell-offs in many tech stocks.
Amazon, the fifth-largest public company, saw its shares plummet by over 5% after announcing a planned $200 billion expenditure for the upcoming year. This money is primarily earmarked for its Amazon Web Services division, the world's largest cloud provider.
Since the start of the week, Amazon's stock has taken a significant hit, losing over $310 billion in market value. But Amazon isn't alone; tech giants Microsoft and Meta have also faced similar fates, with both companies planning to invest hundreds of billions in AI this year.
Collectively, these four tech behemoths - Amazon, Microsoft, Meta, and Alphabet - plan to spend a whopping $650 billion this year to expand their data center and AI capabilities. As a result, these companies have collectively lost nearly $1 trillion in market value over the past five days.
While the S&P 500 and Nasdaq Composite ended the week in the red, there were some notable bright spots. Industrial stocks like Caterpillar and a few energy firms soared, anticipating high demand for their services in data centers.
The industrial and energy sectors of the S&P 500 were among the top performers on Friday, with tech stocks also gaining ground, thanks to chipmakers. Nvidia's shares, in particular, boomed, rising by almost 8%. The AI chip maker 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," reaffirmed 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 saw its shares jump by 7% this week. Unlike other tech companies, Apple has largely avoided the recent AI-induced sell-offs because it outsources most of its cloud computing capacity to 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 sent shockwaves through the software companies and data analysis firms serving industries ranging from real estate to banking, prompting a panic among investors and a heavy sell-off in the sector.
Private credit firms, which own many of these big software and data companies, also took a hit this week. These firms play a crucial role in helping AI and tech giants raise the enormous amounts of capital needed for expansion.
The Dow Jones Industrial Average hit 50,000 for the first time ever on Friday, but this milestone should be taken with a grain of salt. While the Dow contains only 30 stocks and is an all-time high, it's a relatively poor indicator of the overall market strength compared to an index like the S&P 500.
President Donald Trump celebrated this Dow milestone on Truth Social, posting "CONGRATULATIONS AMERICA!" However, for the year, the more representative S&P 500 is up by less than 1%.
Meanwhile, the value of Bitcoin experienced wild swings, dropping to nearly $60,000 late Thursday night before rebounding to over $70,000 by Friday evening. Crypto often behaves differently from more mainstream assets like stocks and bonds.
"Crypto is not an asset and is held by a tiny portion of society," wrote UBS Global Wealth Management's chief economist Paul Donovan on Friday. "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 almost 4% on the Russell 2000 index.
"We are long Main St., short Wall St.," wrote Bank of America analysts on Friday, suggesting that smaller stocks will continue to benefit until Trump's approval rating improves.
Steve Kopack, a senior reporter at NBC News, covers business and the economy, providing valuable insights into these market movements.
