S&P 500, Nasdaq end sharply lower as revived AI doubts ignite tech selloff

US stocks plunged on Thursday, with the Nasdaq experiencing its steepest daily decline since early June. A series of high-profile earnings reports triggered concerns about the AI spending race impacting the tech sector. The S&P 500 closed in negative territory, while the tech-heavy Nasdaq fell 2.6 percent due to microchip-related results.

Meta Platforms' stock dropped 7.0 percent despite beating expectations, as the company announced cash outflows for AI expenses and a two-for-one share split. Tesla's shares fell 3.1 percent even though the company reported positive free cash flow and reduced 2026 capital spending. The Philadelphia Semiconductor Index plummeted 6.7 percent, its largest daily percentage drop since early June.

The SOX remains down 26 percent from its June 22 record high. While the S&P 500 is up 11.9 percent over the same period, technology stocks are suffering due to questions about the AI narrative. Geopolitical tensions in the Middle East have driven crude prices to a five-month high, but labor market data suggests stability may allow the Federal Reserve to maintain its focus on inflation.

Earnings season is in full swing, with 83 percent of S&P 500 companies beating analyst expectations. Companies such as Procter & Gamble, Blackstone, and Lockheed Martin reported positive results, while chipmakers Intel, AMD, Sandisk, and Marvell fell more than 8 percent amid the broader semiconductor sell-off.