A three-day winning streak on Wall Street came to an end Thursday, and the reason was simple: the market's biggest earnings week of the year delivered a jarring split verdict on the payoff from the artificial intelligence boom.
The S&P 500 fell 0.3 percent to close at 7,720.39, the Dow Jones Industrial Average slipped 0.25 percent to 52,342.56, and the tech-heavy Nasdaq Composite dropped 1.38 percent to 26,184.73. The damage was concentrated: Alphabet shares fell more than 12 percent, their worst single day on record, after the company missed Wall Street's revenue and profit expectations, reported a sharp slowdown in core search advertising growth, and posted negative free cash flow. Alphabet had been up about 4 percent for the year heading into the report; the plunge pushed the stock back into negative territory for 2026. Microsoft, which reported the same evening, told a more reassuring story, posting earnings of $4.89 per share versus an expected $4.72, helping explain why strategists described the day's results as sending investors a mixed, even confusing, signal about whether heavy AI investment is paying off.
The jitters continued after the closing bell, when Amazon and Intel both reported results and issued guidance that fell short of expectations, keeping worries about AI infrastructure spending squarely in focus heading into Friday's session. Notably, the pain was not evenly spread. The equal-weighted S&P 500, which strips out the outsized influence of a handful of mega-cap stocks, actually rose about 1.2 percent, and the small-cap Russell 2000 gained roughly 1 percent. In other words, most individual stocks in the market rose Thursday; it was the plunge in a single giant, Alphabet, that pulled the headline indexes down.
The backdrop is a historic wave of capital spending. The four largest so-called hyperscalers, Meta, Alphabet, Microsoft and Amazon, have together guided for roughly $730 billion in combined capital expenditures this year, most of it aimed at building out AI data centers and chips. Meta, which reported the previous week, beat expectations with $64.60 billion in revenue and earnings per share of $7.40 against an estimate of $5.74, and its shares rose on the news. The divergence between Meta and Microsoft's relatively strong reports and Alphabet's stumble has investors asking a harder question: which companies are translating their AI bets into profit, and which are simply spending.
Apple is scheduled to report its own quarterly results early next week, and investors will be watching closely for any further signs of strain in the AI spending story.
Why did Alphabet's stock fall so much?
Alphabet missed Wall Street's revenue and profit targets, reported slower core search advertising growth, and posted negative free cash flow.
Did the whole market fall?
No. Most individual stocks actually rose Thursday; the headline index declines were driven mainly by Alphabet's steep drop.