Alphabet shares GOOGL fell about 1.7% on Tuesday as higher crude prices, elevated Treasury yields and renewed uncertainty over AI demand weighed on technology stocks.
The decline came as investors prepared for what is widely expected to be another Federal Reserve interest-rate increase.
Traders were pricing in a nearly 93% probability of a hike on Wednesday, while the benchmark 10-year US Treasury yield climbed to its highest level since 2007.
Other major technology stocks also came under pressure.
Amazon fell about 1.7%, while Microsoft declined roughly 1%.
The Roundhill Magnificent Seven ETF was down 0.8%.
The weakness came despite a recovery in semiconductor stocks following Monday’s sharp selloff, suggesting investors remain selective about which parts of the AI trade they are willing to back.
Higher yields raise pressure on AI spending
The rise in Treasury yields is particularly important for technology companies because much of their valuation is based on earnings and revenue expected several years into the future.
Higher borrowing costs can make those future cash flows less valuable while increasing the cost of financing the enormous infrastructure investments required to develop and deploy AI.
The issue has become more pressing as major technology companies increasingly turn to debt markets to finance their AI build-outs.
Alphabet was reported last month to be seeking between $20 billion and $25 billion through a US bond offering, following a sharp selloff triggered by concerns around its 2026 capital spending outlook.
A regulatory filing showed that the company offered notes in as many as 10 parts, with maturities ranging from two to 40 years.
Alphabet is not alone in tapping debt markets.
Amazon, Alphabet, Meta and Oracle issued about $194 billion worth of bonds through July 7, up 79% from roughly $108 billion during the same period in 2025, according to a Reuters analysis of LSEG data.
At the same time, the hyperscalers are expected to spend more than $730 billion this year, primarily on AI.
The scale of that investment is already putting pressure on cash generation.
Alphabet reported its first-ever negative free cash flow in the second quarter in late July.
AI slowdown fears add another layer of uncertainty
Investors are also reassessing whether the extraordinary pace of AI investment can continue as industry leaders raise concerns about the technology’s risks.
AI-linked stocks suffered a global selloff on Monday after leaders of major AI companies warned about potentially existential risks associated with the technology.
Anthropic CEO Dario Amodei called on AI companies to slow the pace of model development in an essay posted on X on Saturday. Elon Musk and OpenAI CEO Sam Altman subsequently expressed agreement with Amodei.
Altman also said OpenAI would not proceed with an IPO this year, citing safety concerns.
The comments have raised questions about whether a slower pace of AI development could eventually translate into weaker infrastructure demand and lower capital spending.
However, some analysts see little evidence of an immediate slowdown.
Bank of America analyst Vivek Arya wrote in a Tuesday note that despite concerns over AI investment, “we see no signs of slowing in customer orders, [long-term agreements], capacity commitments or semis pricing.”
That suggests the fundamental demand behind the AI infrastructure buildout remains intact, even as investors become increasingly sensitive to the amount companies are spending to meet it.
Fundstrat sees Magnificent Seven breakout
Despite the near-term pressure on Big Tech, some technical analysts remain optimistic about the sector’s prospects.
Fundstrat believes the Magnificent Seven basket of mega-cap technology stocks is approaching a breakout that could trigger a broader rally in large-cap technology, MarketWatch reported.
“MAGS is on the verge of breaking out and looks quite positive here, with stocks like Apple, Alphabet, and Meta having all firmed up nicely in recent days,” said Fundstrat’s Newton.
“These look more appealing than many semiconductor names, many of which have stabilized but whose rally has proven to be a work in progress – not dissimilar to what happened to software earlier this year,” he added.
According to Newton, the ETF is close to moving above the 70.80 level reached on Sept. 3.
A break above that level could trigger a sharp rally in the Nasdaq 100 and large-cap technology stocks over the following weeks.
“While Nvidia and Amazon have both weakened ever so slightly in recent days, neither has shown sufficient technical deterioration to think these cannot rally back as the Magnificent [Seven] ETF breaks out – which I see as being imminent,” he concluded.
For Alphabet, the competing forces leave investors balancing two very different narratives.
Rising yields and massive AI spending are creating concerns about financing costs and cash flow, while continued customer demand and the possibility of a Magnificent Seven breakout are keeping the bullish case alive.
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