US stocks fell on Thursday as Alphabet’s disappointing quarterly results renewed concerns about rising artificial intelligence spending, while investors assessed inflation data following the Federal Reserve’s decision to leave interest rates unchanged.
The Nasdaq Composite dropped 1.83%, while the S&P 500 declined 0.62%. The Dow Jones Industrial Average fell 184 points.
Alphabet shares fell 13.3% in trading after the Google parent missed expectations for adjusted earnings per share and revenue.
The stock’s decline threatened to erase more than $450 billion from its market value, accounting for most of the potential losses in the Nasdaq Composite.
The company reported negative free cash flow of $9.07 billion and maintained its full-year capital expenditure forecast of $195 billion to $205 billion, keeping investor attention on the costs associated with its AI expansion.
Alphabet’s results weigh on technology stocks
Alphabet’s performance intensified concerns about whether the substantial investments being made by major technology companies will generate sufficient returns.
Investors have increasingly scrutinised spending plans and the use of debt to finance AI infrastructure as borrowing costs remain elevated.
The broader semiconductor sector also traded lower.
Nvidia shares declined about 1.17%, AMD fell 1.27%, and Intel lost 3.78% in trading.
Semiconductor-focused exchange-traded funds also came under pressure, with the iShares Semiconductor ETF falling more than 2% and the Roundhill Memory ETF declining nearly 4%.
Microsoft provided a partial counterpoint to the weakness.
Its shares rose in trading after the company reported better-than-expected quarterly revenue and earnings, supported by strong growth in its Azure cloud business.
Other companies also faced pressure following earnings announcements.
Fortinet shares fell 23% after its third-quarter results, while ServiceNow dropped 23.9% after missing profit estimates.
Marvell Technology declined 12.4% amid reports that it was in advanced talks to acquire data-centre optics maker Lumentum Holdings, whose shares rose 3.83%.
Caterpillar and other stocks move on earnings
Caterpillar shares dropped 9.36% despite reporting better-than-expected third-quarter revenue and earnings.
Sales in its construction industries business came in slightly below estimates, while its unchanged annual sales forecast raised questions about the sustainability of demand linked to data-centre construction and power-generation equipment.
Eli Lilly moved in the opposite direction, gaining 8.6% after forecasting annual revenue above Wall Street expectations, despite trimming its profit outlook.
Investors will also monitor results from Amazon and Intel, both scheduled to report after Thursday’s market close.
Their announcements could provide further insight into technology spending, cloud demand and the outlook for the semiconductor industry.
Inflation data keeps Fed rate outlook in focus
The market weakness followed the Federal Reserve’s decision on Wednesday to maintain its benchmark interest rate in a range of 3.75% to 4%.
Policymakers cited elevated inflation and the need for additional economic information before making further changes.
September’s personal consumption expenditures price index, the Fed’s preferred inflation measure, rose in line with economists’ expectations on a monthly basis, although the annual rate came in slightly below expectations.
Separate data showed that the US economy grew faster than expected in the third quarter.
Despite the latest inflation figures, traders widely expect the Fed to raise rates at its December meeting, according to LSEG data.
The post Nasdaq falls 1.83% as Alphabet sell-off revives fears over AI spending costs appeared first on Invezz
