Wall Street ends lower as Alphabet revenue miss revives AI capex jitters

On Thursday (Oct 29), US stocks declined as investors reassessed big tech's AI spending spree after Alphabet's disappointing quarterly results. The tech-heavy Nasdaq suffered the most significant loss, while the smallcap Russell 2000 advanced. Semiconductor stocks followed a four-day winning streak with a 1.4% drop as investors sought to differentiate between companies that can fund their AI ambitions and those that struggle financially.

Alphabet's shares dropped 12.6%, reflecting its revenue miss and increased AI-related cash burn. The tech-laden Nasdaq lost 1.37%, the Dow Jones Industrial Average fell 0.25%, and the S&P 500 declined 0.3%. Fed policymakers held off on interest rate changes, acknowledging elevated price pressures but promising to review their next move.

Economic data released on Thursday showed a faster-than-expected GDP growth in the third quarter, but inflation continued to heat up due to a war-related oil supply crunch. Third-quarter earnings have reached the halfway point, with 81% of S&P 500 companies beating analyst expectations. Caterpillar topped profit estimates but held steady on growth targets, while Eli Lilly's revenue outlook raised expectations for its drug sales.

Ford's stock rose 12.4% after surpassing third-quarter revenue, and Merck's shares climbed 3.8% after beating earnings expectations, driven by its cancer drug Keytruda and HPV vaccine Gardasil. Software stocks underperformed, with Fortinet and ServiceNow both dropping over 20% after reporting weak quarterly results.