Nasdaq falls 1.4% as Alphabet drops 12.6% amid AI spending concerns
Key Facts
The Nasdaq Composite fell 1.4% in Thursday's session, Oct. 29, 2026, closing at 26,184.72 points after losing 365.13 points. The S&P 500 dropped 0.3% to 7,720.39 points, shedding 23.59 points and posting its first loss in four sessions. The biggest pressure came from megacap technology stocks, with Alphabet Class A shares falling 12.6% in their worst daily performance since they began trading more than 20 years ago. The Associated Press reported that the decline revived investor concerns about slowing company growth alongside rising AI spending. Still, four in five S&P 500 stocks rose, and the agency said the index would have closed higher but for Alphabet's losses. The breadth of gains across the market shows that the index's losses reflected the weight of megacap technology companies more than a broad decline in stocks.
Alphabet's capital investment was a key focus of the market reaction. The Associated Press reported that the company's purchases of property and equipment exceeded $51 billion in the third quarter, alongside a decline in free cash flow. That puts infrastructure spending at the center of investors' assessment of returns on AI expansion, even as its search business continues to grow. The company's chief executive said the annual growth rate in Google Search queries reached a five-year high in the third quarter. But the chief financial officer said capital spending would rise "significantly" in 2027, and that the company would provide more details during its fourth-quarter earnings call. The question facing the stock therefore remained whether rising spending can keep pace with business growth and convert it into cash flow.
Amazon's third-quarter results showed growth in sales and profitability, while attention turned to the company's outlook and the coming shopping season. The company reported that net sales rose 12% year over year to $201.9 billion, while operating income increased to $28.1 billion from $17.4 billion in the same period a year earlier. In cloud computing business AWS, sales rose 39.3% in the quarter ended Sept. 30, compared with growth of 37% in the previous quarter, the fastest pace in about five years. Even so, Amazon shares fell more than 5% in extended trading after the results, as investors focused on the performance of its core businesses. The contrast between the stock's performance and accelerating cloud growth suggests investors are judging the results on a broader basis than AWS growth alone.
Amazon gave a fourth-quarter sales range of $240 billion to $247 billion, equivalent to expected year-over-year growth of 10% to 13% compared with the fourth quarter of 2025. The company also said it plans to hire 300,000 seasonal workers in the United States for the 2026 holiday shopping season. The Associated Press reported that investors are watching for management's comments on the holiday season, which falls within the period underpinning the fourth-quarter outlook. The guidance puts projected sales alongside strong cloud business performance in investors' assessment of the company's results. The stock's decline in extended trading indicates the market is weighing cloud services growth against its expectations for core businesses during the shopping season.
In the semiconductor sector, Reuters linked pressure on Intel shares to a weak fourth-quarter outlook, despite third-quarter earnings that beat analysts' estimates. The company's chief financial officer said the slowdown in the PC market would continue "at least through the first half of next year." The company also pointed to a weak market and memory costs as weighing on its outlook. That puts the PC market at the heart of the challenge facing Intel in the coming period, as investors also track how it affects quarterly projections. The available data do not include a verified percentage decline in the stock, so the significance of the move here lies in forward guidance and the factors cited by the company.
In broader markets, the yield on the 10-year U.S. Treasury fell to 4.94% on Oct. 29, from 5.05% at Wednesday's close. The yield had topped 5.30% earlier in October, reaching its highest level since 2002 before retreating. The decline in the yield came alongside losses in U.S. indexes during the session, while pressure on stocks was concentrated in megacap technology companies. The U.S. Bureau of Labor Statistics is scheduled to release the third-quarter Employment Cost Index on Oct. 30, 2026, at 08:30 a.m. Eastern time. The release is the next data point for investors after a session marked by a clear divergence between index losses and the breadth of gains among S&P 500 stocks.