Alphabet stock falls 12.5%, dragging down Wall Street

New York. The U.S. stock market slipped lower on Thursday as Alphabet, the parent company of Google and YouTube, posted its steepest single-day decline in more than two decades. The company’s shares fell 12.5%, a drop that weighed heavily on the broader market and pushed the Nasdaq composite down 1.4%. The S&P 500 index lost 0.4%, marking its first decline in four days, while the Dow Jones Industrial Average dipped 0.3%, or 162 points, as of 10:15 a.m. Eastern time.

Alphabet’s stock price is among the most influential on Wall Street due to the company's size. The sharp decline follows an earnings report released late Wednesday that revealed weaker growth for the summer quarter than analysts had predicted. Investors are increasingly focused on the company's heavy investments in artificial intelligence technology and whether those expenditures will generate sufficient returns. The report showed that Alphabet burned through more cash during the latest quarter, a metric known as free cash flow, after its purchases of property and equipment exceeded $51 billion.

Concerns about the cost and payoff of AI infrastructure are affecting the entire industry. Companies are rushing to build data centers and stock them with AI chips, but rising borrowing costs are putting pressure on future spending. Traders remain worried that the AI revolution may not deliver the level of profit and productivity hoped for, a sentiment that contributed to the market's nervous tone on Thursday.

Not all tech stocks suffered the same fate. KLA Corp., a maker of semiconductor manufacturing equipment, rose 6.8% after reporting stronger summer profits than expected. Eli Lilly gained 7.8%, while Mastercard climbed 4.9% and Merck added 4.6%. DoorDash also jumped 6% following an announcement that it agreed to buy Instacart for $65 per share. DoorDash also reported profit and revenue figures that beat analyst estimates.

In the bond market, Treasury yields eased after a mixed set of U.S. economic data. Preliminary readings suggest the overall economy may have accelerated more than expected in the summer, driven by consumer spending and business investment in AI. However, other reports indicated that American income growth slowed in September and that inflation measures worsened. Fewer workers applied for unemployment benefits last week, a sign that layoffs may remain limited.

The yield on the 10-year Treasury fell to 4.98% from 5.05% late Wednesday, returning to levels seen earlier in the week. This move coincided with falling oil prices, as Brent crude dropped 1.2% to $110.31 per barrel. Traders are interpreting recent Federal Reserve messages as potential signals that interest rate hikes may slow down, which has helped lower yields.

Global markets showed mixed results, with European indexes rising after a varied finish in Asia. In South Korea, the Kospi index fell 1.2% as Samsung Electronics shares dropped 4.1%, despite the company reporting a significant increase in profits.