Alphabet's 12.6% drop shows investors want proof that AI spending pays off
Corporate profits are strong, yet US tech stocks fell on Thursday as investors questioned whether huge AI spending will turn into steady cash.
The short version
- Alphabet shares fell 12.6% after revenue missed expectations and AI spending used up more cash.
- The Nasdaq fell 1.37% and the Philadelphia semiconductor index fell 1.4%.
- The small-cap Russell 2000 rose 1%, so the worry has not spread across the whole market.
- Of 253 S&P 500 companies reporting, 81% beat profit expectations, per LSEG.
- The Fed held rates and called inflation elevated; war-related oil tightness is lifting energy prices.
Why it matters
Markets are starting to ask not just who is spending on AI, but who can pay for it. That scrutiny may eventually shape how the companies behind AI tools plan and price them, though the source does not say how. For ordinary users, it is a reason not to depend on a single vendor.
A bad day for big tech
US stocks ended Thursday lower across the three main indexes. The Dow fell 0.25% to 52,342.56, the S&P 500 fell 0.30% to 7,720.39, and the Nasdaq fell 1.37% to 26,184.72. The Philadelphia semiconductor index, which tracks chipmakers, fell 1.4%.
As finance.technews.tw reported, the main trigger was Alphabet, Google's parent company. Its quarterly revenue, released after the market closed on Wednesday, came in below expectations. Its AI-related spending was also using up cash faster, and the shares dropped 12.6%.
The question is cash, not growth
Tech giants keep expanding what they spend on AI infrastructure, such as data centers and the chips inside them. Investors are now looking harder at what they get back for that money.
The report describes a dividing line forming. Some companies can fund AI work from the cash their businesses generate. Others have to borrow or keep burning cash to push ahead, and investors are treating those two groups differently.
Other stocks took hits too
Cybersecurity firm Fortinet and business-software company ServiceNow each fell more than 20% after reporting results. Chip company Marvell Technology fell 13.2% on reports that it is in talks to buy optical-equipment maker Lumentum.
After the close, Amazon shares dropped 6.5% because its revenue forecast for the fourth quarter fell short of expectations.
Strong profits, wary mood
Overall company earnings are solid. According to LSEG, 253 S&P 500 companies have reported third-quarter results, and 81% beat analyst expectations. Overall third-quarter profit is expected to grow 31% from a year earlier.
The small-cap Russell 2000 index rose 1%. Ross Mayfield, an investment strategist at Baird, took that as a sign that doubts about AI spending have not spread to the whole market, and that opportunities remain outside AI.
The economy adds pressure. The Fed held interest rates steady on Wednesday and said inflation is still high. Preliminary third-quarter GDP growth beat expectations, but oil supply tightness tied to war is pushing energy prices, and inflation, higher.
What to watch
- Whether other big tech firms face the same questions about cash and AI spending when they report.
- Whether investor pressure changes how AI companies set plans, usage limits or prices. The source does not say.
- How the Fed responds if energy-driven inflation keeps rising.
Try it
If you rely on an AI tool for work, write down one or two alternatives you have already tested, and keep your best prompts in a document you control so you can move them if terms change.
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Listen to the daily showsFirst reported by finance.technews.tw · Read the original. Written by the SI Agent News Desk from the reporting above.Written with AI from the source above. Every number is checked against the source. Spot a mistake? Corrections.