Alphabet Plunges 12% as AI Investment Fears Knock New York Stocks Lower

Tech Selloff Spreads After Earnings Disappoint

Semiconductor Index Falls for First Time in Five Sessions

Alphabet’s earnings shock hit Wall Street, as growing doubts over whether heavy artificial intelligence investment can translate into profits triggered a selloff in technology shares. All three major indexes ended lower, with the Nasdaq posting the steepest decline.

The Nasdaq Composite closed down 365.13 points, or 1.38%, at 26,184.72 on October 29. The S&P 500 fell 23.59 points, or 0.30%, to 7,720.39, while the Dow Jones Industrial Average slipped 132.54 points, or 0.25%, to 52,342.56.

At the center of the selloff was Google parent Alphabet. The stock tumbled 12.64% after third-quarter revenue and adjusted earnings per share both missed market expectations. As spending on AI kept rising while results failed to meet expectations, concern over cash burn intensified.

The unease spread to other technology stocks. Fortinet and ServiceNow, which reported earnings, each dropped more than 20%, while Marvell Technology fell more than 13%. The moves underscored growing investor skepticism that lofty valuations can be sustained on AI growth expectations alone.

Semiconductor shares also failed to extend their gains. The Philadelphia Semiconductor Index fell 1.42%, ending a four-session winning streak. Micron fell 4.98% and AMD lost 2.08%. SK Hynix American depositary receipts dropped 1.58%.

By contrast, pharmaceutical stocks rallied after earnings improved. Eli Lilly jumped 6.63% after raising its full-year revenue forecast on stronger sales of weight-loss treatments. Merck also rose 3.83% on solid results. Small-cap stocks, unlike technology shares, also drew buying interest.

Macroeconomic data offered no clear direction. The advance reading of U.S. third-quarter gross domestic product showed annualized growth of 3.4%, above expectations and confirming continued economic expansion. But the personal consumption expenditures price index, the inflation gauge closely watched by the Fed, accelerated from the previous month. Even after the central bank held interest rates steady a day earlier, inflation concerns persisted, keeping markets focused on the outlook for monetary policy.