Tech stocks were dragged lower by a record drop in Alphabet after disappointing results renewed investor concerns about the threat that artificial intelligence poses to its core business.
The tech-heavy Nasdaq 100 fell 1.4 per cent on Thursday while the S&P 500 fell 0.3 per cent, bringing to a halt a three-day run of gains for both indexes.
Alphabet shares fell 13 per cent, the stock’s worst drop on record and the second biggest-ever market value wipeout in one day for any US stock, after the company reported disappointing search and advertising sales that reinforced worries about AI’s threat to its main business. The biggest one-day wipeout so far has been Nvidia, when it lost over $590 billion in January 2025.
“After missing forecasts on essentially every key metric except cloud revenue tonight, Google is playing the AI Hunger Games from a position of weakness,” Michael O’Rourke, chief market strategist at JonesTrading Institutional Services LLC, wrote in a note on Wednesday.
“Disappointing results in advertising, a business it and Meta Platforms dominate globally, illustrate the key risk investors fear.”
Stocks outside the tech sector were broadly higher, with around 400 stocks in the benchmark index gaining while the S&P 500 Equal Weight Index advanced 1.2 per cent.
“AI uncertainty may not have run its course yet, but the damage to the broad market has so far been limited,” wrote Chris Larkin at E*Trade from Morgan Stanley. “Today’s price action is a microcosm of what the stock market has been experiencing for much of October — concerns about the AI trade weighing on the tech and communication services sectors, but leaving other areas of the market relatively unscathed.”
The latest earnings have renewed doubts over the AI trade, raising questions about whether significant spending on the technology can generate returns quickly enough to justify lofty valuations.
Chip stocks took a hit, with the Philadelphia Semiconductor Index falling 1.4 per cent. Software shares were also lower on Thursday after disappointing quarterly results from ServiceNow and Fortinet added to the broader concerns. ServiceNow dropped 27 per cent for its largest decline on record while Fortinet fell 20 per cent, the most since August 2025.
Investors were slightly more encouraged by Microsoft, which reported earnings after the close on Wednesday. The company posted surging growth in its cloud business while keeping its capital expenditures in check. Shares still fell 0.2 per cent on Thursday, even after the company drew blowout demand for its $25 billion bond offering.
Meanwhile Caterpillar, which builds power-generation equipment used for data centers, saw its shares slump 9.3 per cent — the worst drop since March 2020 — after posting third-quarter earnings that only modestly beat expectations.
Outside of AI, DoorDash shares gained 5.6 per cent after the company reported earnings that beat estimates and announced its $17 billion deal to buy Instacart.
The indexes were also weighed down after President Donald Trump said at a rally on Thursday afternoon that the war in Iran will be over very soon. That message comes after the Wall Street Journal reported earlier this week that the US told several Gulf Arab countries to be prepared for a short, intense military campaign after the midterm elections.
