AI Spending Plagues Stock Market, Causes Alphabet to Drop 3%
Tech stocks are trending down and are not looking very positive this earnings season after investors scrutinize profits and AI investments.
Quick overview
- Alphabet's stock fell nearly 3% following its quarterly earnings report due to concerns over high AI spending outpacing profits.
- Despite decent earnings, Alphabet's significant capital expenditures for 2026 are projected to reach $180 billion, alarming investors.
- The tech sector is facing pressure as major companies like Microsoft and AMD also experience stock declines amid tight profit margins.
- Investor confidence in tech stocks is waning, reminiscent of previous market downturns, as the focus on AI investments raises profitability concerns.
Just one day after releasing their quarterly earnings report, Alphabet (GOOIGL) stock fell almost 3% as investors worry about how AI spending is outstripping profits.
The U.S. stock market indices were mostly flat on Thursday, but investors should note that Alphabet is feeling backlash from its exceptionally high AI spending with a quick stock decline after posting decent earnings on Wednesday.
All three major indices- the Dow Jones, Nasdaq, and S&P 500 climbed around 0.1% higher on Thursday following earnings reports from Alphabet. Investors are still waiting on Amazon’s (AMZN) quarterly earnings report to be released later this week, and the company’s profits will be under scrutiny since they too spend heavily on AI technology.
Tech Stocks In Danger
The stock market is currently in a major earnings season where Magnificent Seven companies and other leading businesses report their quarterly earnings, but the stock movements are telling a story about how investors feel about slim profits. Tech giants like Meta Platforms, Microsoft, and Alphabet have all prioritized artificial intelligent investments, and their profits have taken a hit as they race to have the most cutting edge AI tech.
Meta is one of the few companies to come out of this earnings season ahead after posting excellent revenue numbers and demonstrating remarkable growth. Because Alphabet, Microsoft, and Advanced Micro Devices (AMD) have all seen their stock fall as a result of tight profit margins, the rest of the tech industry is in a dangerous place. The Nasdaq Composite index, with its focus on tech stocks, is down 1.51% at a time when it should be soaring.
We are seeing a repeat of what happened back in November of 2025, with investors, analysts, and shareholders worried about the focus on AI and not on profits. As investors lose their confidence in tech companies, the stock market is experiencing a crisis in the making, and mega-cap stocks are hurting, according to Reuters.
With AMD down 17% and Microsoft dropping from a share price of $481 to $405 in a few days, it is obvious that technology stocks are bearish. Once earnings season is over, the tech stocks may start to stabilize and get some breathing room before the next quarterly report, but the pressure is on this part of the stock market for excellent performance, high profit margins, and proof that AI investments are paying off.
Alphabet posted earnings that were better than anticipated, but its capital expenditures for 2026 are expected to be twice what it invested in 2025- in the region of $180 billion. That cuts into their profits and is likely to alarm shareholders, as we have already seen their stock price drop for Thursday.
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