Alphabet's 11.8% Slide Weighs on US Markets as AI Spending Scrutinized
The tech giant's quarterly capital expenditure topped $51 billion, contributing to a broad market decline despite mixed economic indicators.
By Samuel Peterson ·
Shares of Alphabet, the parent company of Google and YouTube, dropped 11.8% on Thursday, marking its steepest decline in over two decades. The slump dragged the Nasdaq composite down 1.2% and pressured the S&P 500, which fell 0.3% by mid-morning trading.
The sell-off followed the company's third-quarter earnings report released late Wednesday. Alphabet disclosed that its purchases of property and equipment exceeded $51 billion, a move that lowered its free cash flow. Investors are questioning whether these heavy investments in artificial intelligence infrastructure will generate sufficient returns.
Alphabet's decline weighed heavily on the broader market. The S&P 500 would have risen during the session if not for the drop in Alphabet's stock. The Dow Jones Industrial Average also dipped 0.2%, falling 104 points, though other segments of the market showed strength.
Concerns regarding the profitability of AI infrastructure projects extended beyond Alphabet. High borrowing costs are currently limiting the ability to finance additional data centers and AI chips. The yield on the 10-year Treasury note fell to 4.98% from 5.05% late Wednesday, though it remains elevated compared to earlier in the month.
Several companies posted gains after releasing stronger-than-expected quarterly results. Eli Lilly rose 6.4%, while Merck added 5.1%. DoorDash advanced 6.6% following its announcement of an agreement to acquire Instacart in a deal valuing it at $17 billion. Norwegian Cruise Line Holdings also gained 14.1%.
Economic data released Thursday presented a mixed outlook. A preliminary report indicated that economic growth may have accelerated during the summer, driven by consumer spending and business investment in AI. However, income growth in September fell short of economist expectations, while a measure of inflation worsened.
Treasury yields eased following these reports. The price of Brent crude oil fell 2% to $109.42 a barrel. In Europe, equity indexes rose after the European Central Bank maintained interest rates, and Christine Lagarde announced her resignation, effective February.
In Asia, South Korea's Kospi index declined 1.2%. Samsung Electronics dropped 4.1% despite reporting a jump in quarterly profit.
Source: The Reporter
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