NEW YORK — U.S. stocks fell sharply Thursday morning as investors reacted to the first major earnings reports from the technology sector’s biggest names, with rising concerns over ballooning artificial intelligence spending outweighing otherwise solid quarterly results.
The Dow Jones Industrial Average stood at 51,696.00 as of 10:51 a.m. Eastern time, down 522.58 points, or 1.00%, on the day. The decline followed a nearly flat session Wednesday, when the Dow closed at 52,218.58, down just 6.06 points.
A rough morning across the board
Thursday’s selloff extended well beyond the Dow. The S&P 500 dropped roughly 1.08%, while the tech-heavy Nasdaq Composite tumbled about 2.1%, leading the broader market retreat as investors digested a wave of earnings reports from some of the market’s most closely watched companies.
What triggered the drop
The decline came after Alphabet and Tesla, two of the so-called “Magnificent Seven” megacap technology companies, both reported second-quarter results after Wednesday’s closing bell. Alphabet posted a fundamentally strong quarter, but the Google parent company’s decision to raise its capital expenditure outlook rattled investors who have grown increasingly focused on whether massive AI infrastructure spending is translating into proportional returns. Shares of Alphabet fell in the wake of the report despite the underlying strength of its results.
Tesla added to the cautious tone. Chief Executive Elon Musk told investors that 2026 would be a “massive capex year” for the company, emphasizing continued heavy investment in areas including its Optimus robotics program, robotaxi expansion and data center buildout, comments that further fed into broader market anxiety about the scale of spending commitments being made across the technology sector without clear near-term payoff.
A market already on edge over AI valuations
Thursday’s reaction reflects a broader tension that has been building in markets throughout the year: even as major technology companies continue posting strong headline results, investors have grown more skeptical about whether the enormous sums being poured into AI infrastructure will generate returns commensurate with the spending. That skepticism has made capital expenditure guidance, rather than quarterly revenue or profit figures alone, an increasingly important factor in how markets respond to Big Tech earnings.
The pattern was evident even before Thursday’s session. Markets had already shown signs of rotating away from momentum-driven AI trades in the days leading up to this week’s earnings reports, with semiconductor stocks posting losses amid a broader search for the next catalyst to sustain the AI trade that has powered much of the market’s gains over the past two years.
Oil prices and bond yields add pressure
Beyond the technology earnings, rising oil prices and climbing bond yields also weighed on sentiment Thursday. Crude prices have continued climbing this week, extending gains tied to prolonged military exchanges between the United States and Iran, with Brent crude futures settling above $94 per barrel Wednesday, their highest level in more than a month. The 10-year Treasury yield has also pushed higher, retesting levels last seen in May near the start of the Iran conflict, adding another layer of pressure on equity valuations.
A volatile stretch for markets
Thursday’s losses continue what has been a choppy week for U.S. stocks. The Dow fell 307.16 points, or 0.59%, on Monday amid renewed volatility tied to the U.S.-Iran conflict, before trading essentially flat on Wednesday as markets awaited the week’s marquee earnings reports. That back-and-forth pattern reflects a market caught between genuinely strong corporate performance in some sectors and growing unease about elevated valuations, aggressive AI-related capital spending, and geopolitical risk factors that have shown no sign of resolving quickly.
A different read from Wall Street veterans
Not all voices on Wall Street have expressed alarm about the market’s current trajectory. Stifel Financial Chairman and CEO Ron Kruszewski struck an optimistic tone in a recent television interview, describing ongoing concerns about the national deficit, dollar weakness and inflation as standard, recurring business challenges rather than signs of deeper structural trouble. At the same time, Kruszewski identified the rapid rise of artificial intelligence itself as a more significant risk factor for markets going forward, a view that aligns with the caution investors have shown this week around AI-related capital spending specifically.
What else is on deck this week
Alphabet and Tesla represent just the first two of the “Magnificent Seven” companies to report second-quarter results this earnings season, with additional major reports still ahead. Other companies scheduled to report in the coming days include IBM and Intel, both of which are expected to offer further data points on enterprise technology spending and semiconductor demand that could either reinforce or ease the concerns driving Thursday’s selloff.
What investors are watching next
With earnings season still in its early stages, market participants are likely to remain highly sensitive to any additional signals about AI-related capital spending plans from the remaining megacap technology companies still scheduled to report. Given how sharply markets reacted to Alphabet’s raised spending guidance despite an otherwise strong quarter, investors appear to be applying a higher bar for what counts as a good outcome this earnings season, one that increasingly requires companies to demonstrate a credible path toward monetizing their AI investments rather than simply continuing to increase spending.
For now, Thursday’s decline leaves the Dow down more than 500 points on the session, underscoring how quickly sentiment can shift even amid a backdrop of genuinely strong corporate earnings, when investors begin to question the sustainability of the spending driving those results in the first place.
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