Two of the biggest names in tech dragged Wall Street to its worst day in a month, and the pullback centered on one worry: how much these companies plan to spend on AI. Both the S&P 500 and Nasdaq had their worst one-day performances since June 23, falling 1.2% and 2.2%. The Dow dropped around 1% for its fifth losing day in six.
Alphabet and Tesla reported after Wednesday's close, and investors did not like what they heard about spending plans. Alphabet raised its full-year guidance for capital expenditures, and the Google parent fell 7%. Tesla CEO Elon Musk called 2026 a "massive capex year" tied to Optimus robots, robotaxis, and data centers, and the stock tumbled nearly 15%, its worst day since March 2025. CNBC put the combined loss for the two companies at roughly $500 billion.
A rally in oil made things worse. Brent crude settled above $100 for the first time since late May after Houthi strikes on two Saudi tankers in the Red Sea, and the jump revived inflation fears and pushed the 10-year Treasury yield to its highest since January 2025.
The reaction split the tech world along a line that used to move together. Kevin Gordon at the Schwab Center for Financial Research noted the correlation between chip stocks and the big AI spenders has fallen to near 0.16, close to no connection at all.
- Alphabet and Tesla, the two AI spenders, dropped 7% and 14% as investors questioned the return on that spending, Schwab's Joe Mazzola wrote.
- Intel, a chip supplier, rallied about 9% after the close on its fastest quarterly revenue growth since 2011, with data center revenue up 59% from a year earlier.
Microsoft, Meta, and Apple all report next week, and investors will watch whether they get the same treatment Alphabet did over AI spending.
