Communication breakdown
SPY•US stocks fell on Thursday as Alphabet dropped a record 12.6% after its latest earnings, weighing on communication services stocks and reviving concerns over AI spending. The Nasdaq fell 1.4%, while the Dow and S&P 500 each lost 0.3%.
1. Stocks fall as Alphabet sinks
The three major US stock indexes fell on Thursday despite lower oil prices, declining bond yields and upbeat economic growth data. Communication services stocks dropped 6.6%, their biggest fall since February 2022, as Alphabet shares sank a record 12.6% after its third-quarter results missed expectations and its AI spending plans pointed to a sharp acceleration in cash burn. The decline wiped around $500 billion off Alphabet’s market capitalization.
2. Investors scrutinize AI spending
The selloff highlighted investor sensitivity to AI firms’ cash flow. Oracle shares had risen 11% on Wednesday after the company said it plans to cap external financing and achieve positive cash flow in the second half of fiscal 2028, though they fell on Thursday. Amazon fell 12%, Intel dropped 20% after the bell and ServiceNow slid 27%.
3. Fed communication in focus
The article also highlighted questions about Federal Reserve policy after Chair Kevin Warsh said the central bank would reduce its policy-setting meetings to six in 2028, from seven of eight meetings next year. Warsh said the change would give the Federal Open Market Committee more time for longer-term strategic views. The article said fewer policy meetings could mean less volatility around scheduled meetings but potentially more between them.
