US stocks fall as Alphabet plunges 10% on weak earnings, reviving AI spending concerns

“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. “Disappointing results in advertising, a business it and Meta Platforms dominate globally, illustrate the key risk investors fear.” 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.

Investors will get even more earnings to parse when Amazon.com Inc. reports after the market closes on Thursday. Chip stocks took a hit, with the Philadelphia Semiconductor Index falling 1.8%. Software shares were also lower Thursday after disappointing quarterly results from ServiceNow Inc. and Fortinet Inc. added to the broader concerns. The companies’ shares traded down by about 20%. Investors were slightly more encouraged by Microsoft Corp., 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 wavered at the open. Meanwhile Caterpillar Inc., which builds power-generation equipment used for data centers, saw its shares slump 8% after posting third-quarter earnings that only modestly beat expectations. Outside of AI, DoorDash Inc. shares gained 5% after the company reported earnings that beat estimates and announced its $17 billion deal to buy Instacart. Stocks ended the day higher on Wednesday after the Federal Reserve voted to hold interest rates steady.