ASX set to slip, Wall Street hit by tech rout; Binance sees withdrawals spike as it returns online

US technology stocks suffered a sharp selloff, pulling the broader market lower. The Nasdaq composite dropped 2.9 per cent, the S&P 500 fell 1.8 per cent, and the Dow lost 572 points, or 1.1 per cent. The S&P 500 also recorded its third straight losing week.

The pressure centred on companies tied to artificial intelligence. Intel plunged 28.6 per cent after giving a weaker profit outlook. Nvidia fell 4.2 per cent, while Amazon and Alphabet also declined amid concerns about heavy AI spending and cash use. Investors questioned whether those investments would create enough future profit.

Australia was expected to open lower, with futures pointing to a four-point fall. The Australian dollar traded at US70.29¢. The US market remained only 3.1 per cent below its record, but growing uncertainty made the recent rally look increasingly fragile.

A tech-stock rout is a steep, widespread fall in technology-company share prices. It matters because technology firms have become major forces in market indexes, so their losses can drag down the wider market. The article links the selloff to worries that enthusiasm for artificial intelligence pushed valuations too high.

AI-linked companies were vulnerable because they are spending enormous sums before the financial payoff is certain. Amazon spent $US94.8 billion on property and equipment, primarily for AI, while Alphabet reported heavy cash use. Nvidia, a leading supplier for AI data centres, fell 4.2 per cent. Intel dropped 28.6 per cent after its outlook disappointed.

Investors are shifting from the “hopes and dreams” phase to the “show me” phase. They want evidence that AI investment will produce enough profit and productivity. Higher interest rates also threaten to slow new data-centre construction, weakening expected growth.

The article describes unusually large financial commitments across technology and cryptocurrency. Amazon reported $US42.4 billion in negative free cash flow over the previous 12 months and spent $US94.8 billion on property and equipment, mainly on artificial-intelligence technology. Those figures show the scale of the race to build AI capacity.

The Binance hack affected more than $US6 billion worth of cryptocurrency. Binance later said it had covered 95 per cent of $US6.3 billion of stolen assets. When the exchange came back online, customers withdrew $US3.64 billion, equal to 2.1 per cent of its assets. Withdrawals initially surged before stabilising.

These figures matter because they show pressure on both sides of the market. Technology companies are committing vast sums before returns are proven, while crypto customers are rapidly moving funds after a security breach. Bitcoin also fell below $US77,000, from above $US86,000 earlier in the month.

A company can report a better-than-expected profit and still lose market value. Share prices reflect expectations about future growth, cash generation, risks, and spending, not just the latest quarter. Investors may sell if the outlook becomes less convincing or if the cost of achieving growth rises.

Intel’s latest profit beat expectations, but its forecast for the final three months of the year fell short, sending its stock down 28.6 per cent. Amazon’s summer profit also disappointed, and investors focused on its $US42.4 billion cash-flow burn. Coinbase reported stronger results, but its shares fell 10.6 per cent after the Binance hack shook confidence in the crypto industry.

The market is therefore demanding proof that high spending will produce durable returns. Companies tied to AI face especially high expectations. Even strong current results may not offset worries about cash use, slowing demand, high interest rates, or weaker future profits.

A major exchange hack can create immediate pressure from customers who fear further losses. They may withdraw funds, avoid deposits, or question whether the platform can protect and recover assets. That response can weaken confidence even if the exchange remains operating and promises compensation.

Binance went back online after an attack that affected more than $US6 billion in cryptocurrency. Customers then withdrew $US3.64 billion, or 2.1 per cent of the exchange’s assets. Binance said withdrawals were stabilising, deposits remained “substantial”, and it had covered 95 per cent of $US6.3 billion in stolen assets.

The shock also spread through markets. Bitcoin fell below $US77,000, compared with more than $US86,000 earlier in the month. Coinbase dropped 10.6 per cent, and Strategy fell 7.8 per cent. The episode shows how a security failure at one large exchange can affect customers, prices, competitors, and investor confidence.

Cash flow shows how much money a business generates after its operating costs. Capital spending is money used for long-term assets such as equipment and data centres. Heavy spending can support future growth, but it reduces cash available today and may require borrowing or other funding.

Amazon spent $US94.8 billion on property and equipment, primarily AI-related, while recording negative free cash flow of $US42.4 billion over the previous 12 months. That spending could be justified if AI services later produce enough revenue, profit, and productivity. If returns disappoint, the investment becomes a costly burden.

The article says investors are questioning whether hundreds of billions of dollars will generate enough profit and productivity. Companies therefore need to show that their AI systems create durable economic value. Until they do, high spending can pressure shares, especially when interest rates raise financing costs and make future returns less attractive.

Growth stocks are valued heavily on profits expected many years ahead. When interest rates rise, those future profits are discounted more sharply, reducing their value today. Higher rates also make borrowing more expensive, which can pressure companies whose expansion depends on large amounts of new funding.

The article says high rates may slow the further construction of AI data centres. That matters because chipmakers and other AI winners depend on continued spending to expand computing capacity. If projects become more expensive or less profitable, companies may delay them, reducing expected orders and future growth.

Higher rates can also encourage investors to consider government bonds. This is a broader financial principle rather than a specific event described in the article: bonds offer scheduled interest payments, and their yields become more competitive when rates rise. As a result, some money may move away from expensive growth stocks, adding pressure to technology valuations.