NEW YORK (AP) — A potentially historic drop for Alphabet's stock is dragging the U.S. market lower Thursday after the company behind Google and YouTube reported weaker growth for the summer than analysts expected. The report raised worries about whether all its huge investments in artificial-intelligence technology will pay off.
The S&P 500 fell 0.6% and was on track for its first loss in four days. The Dow Jones Industrial Average was down 209 points,
or 0.4%, as of 9:35 a.m. Eastern time and the Nasdaq composite was 1.9% lower.
Alphabet is one of the most influential stocks on Wall Street because it’s one of the largest, and its 13.4% drop was on track to be its worst on record. It was under heavy pressure to at least meet analysts’ expectations for growth amid concerns about how much it’s spending to invest in AI.
Alphabet said late Wednesday that it burned through more cash during the latest quarter, according to a measure called free cash flow, after its purchases of property and equipment topped $51 billion.
Such worries are weighing on the entire AI industry after a frenzy to build data centers and fill them with AI chips. Not only are worries high that the AI revolution may not produce the kinds of profits and productivity that would make the investment worth it, future spending is also under pressure because it’s become more expensive to borrow money.
Other companies helped to blunt the effect of Alphabet's drop on the market after reporting stronger profits for the summer than analysts expected. KLA Corp., whose equipment helps make semiconductors, rose 4.1%. Eli Lilly climbed 7.2%, and eBay rose 3.3%.
Outside of earnings reports, DoorDash rose 4.2% after saying it agreed to buy Instacart for $65 per share. Separately, DoorDash also reported profit and revenue for the latest quarter that missed analysts’ expectations.
In the bond market, Treasury yields eased following mixed data on the U.S. economy.
The overall economy’s growth may have accelerated by more during the summer than economists expected, according to a preliminary reading thanks to spending by U.S. consumers and businesses investing in AI. But other reports said Americans' growth in incomes was weaker in September than economists expected, while a measure of inflation worsened.
Fewer U.S. workers applied for unemployment benefits last week, meanwhile, which could indicate few layoffs across the country.
Following the jumble of reports, the yield on the 10-year Treasury fell to 4.95% from 5.05% late Wednesday. It’s back below where it was early Wednesday, before traders began interpreting the latest messages from the Federal Reserve as potential signals that it may pare back on hikes to interest rates to keep a lid on inflation.
In stock markets abroad, indexes rose in Europe following a mixed finish in Asia. South Korea’s Kospi fell 1.2% due to a drop for market heavyweight Samsung Electronics. It sank 4.1% even though it reported a big jump in profit.
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AP Business Writer Chan Ho-him contributed to this report.
