US stocks sold off on Thursday as megacap technology shares tumbled on fears over the rising cost of the artificial intelligence boom. Alphabet and Tesla led the losses after both companies lifted their spending plans. Oil prices jumped at the same time, and Treasury yields rose.
Megacap technology dragged Wall Street sharply lower at Thursday's open, with Alphabet and Tesla sliding after quarterly reports renewed worries about how much the AI race is costing.
The Dow Jones Industrial Average dropped 1.2%, or more than 600 points, hitting an early-morning low of 51,557. The S&P 500 and the tech-heavy Nasdaq composite fell 1.5% and 2.8%, respectively, in morning trading. Small caps held up better, as the Russell 2000 sank only 1%.
Alphabet and Tesla lead the retreat
Alphabet gapped nearly 7% lower, trading near 319 and cutting its year-to-date gain to less than 3%. The move pushed the stock into correction territory. Investors reacted to the company's decision to raise its 2026 capital-expenditure outlook to a range of $195 billion to $205 billion, up from $180 billion to $190 billion.
Tesla fared no better. Its shares plunged 7% premarket after second-quarter earnings came in far below Wall Street's views, despite strong revenue growth from EV sales. Capital spending at the carmaker surged 142% year-on-year to $5.79 billion in the quarter, and it expects more than $25 billion in capex this year.
Chief Executive Elon Musk defended the spending on the earnings call: "This is a massive capex year."
Where buyers stepped in
Not every stock fell. Micron Technology gained more than 3%, as semiconductor-equipment and data-storage names bucked the heavy tech selling.
Crude oil climbed sharply too. West Texas Intermediate jumped nearly 5% to around $90.85 a barrel after Iran-backed Houthi rebels claimed to attack two Saudi Arabian oil tankers in the Red Sea. The 10-year Treasury yield rose to 4.71%.
The selloff had been building since Wednesday, when Alphabet slid 3% in extended trading after lifting its capital-expenditure forecast. One bright economic signal cut against the gloom: weekly jobless claims unexpectedly dropped to 187,000, against expectations for a rise to 214,000.
Sources: Investor's Business Daily, CNBC, CNBC
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