Stocks Slide on AI Concerns: Markets Wrap

Alphabet’s shares slump as investors wait for AI to pay off Tesla sinks as carmaker tethers future to delayed robotaxis

Stocks tumbled after a disappointing start to the megacap earnings season, sparking speculation that the artificial-intelligence frenzy driving the bull market still needs to deliver tangible returns.

A selloff in major technology companies pushed the S&P 500 toward its worst session in almost three months. Alphabet Inc. fell 4% after the Google parent invested heavily in AI, resulting in higher-than-expected spending. Tesla Inc. also reported a profit miss and delayed its autonomous taxi rollout, plunging 12%. While megacaps have fueled most of this year’s equity gains, traders are seeking more evidence of returns on the billions spent on AI. “Investors are finally waking up to all that AI spend and realizing it is much more of an expense right now rather than a revenue generator,” said Peter Boockvar of The Boock Report.

The S&P 500 dropped 1.5%, and the tech-heavy Nasdaq 100 lost 2.5%. A Bloomberg gauge of the “Magnificent Seven” megacaps slumped over 4%, significantly underperforming smaller firms.

Treasury yields fell, led by shorter maturities on speculation the Federal Reserve will cut rates soon. Former New York Fed President William Dudley called for lower US borrowing costs, possibly at next week’s meeting. However, many analysts believe such a move would be concerning, indicating officials might be rushing to avoid a recession.

The loonie was steady after the Bank of Canada’s decision to cut rates, focusing on “downside risks.” Weak data from Europe also weighed on sentiment.

Corporate Highlights:

• Texas Instruments Inc. ( $TXN): Provided a sales outlook indicating an end to the inventory glut, reassuring investors of a market revival for the company’s chips.
• AT&T Inc. ( $T): Added more mobile-phone subscribers than expected in the second quarter, with fewer cancellations and more customers adding wireless service to their broadband plans.
• Visa Inc. ( $V): Reported quarterly revenue that narrowly missed Wall Street estimates, a rare miss for the world’s biggest payments network.
• Pfizer Inc. ( $PFE): Gene therapy for a severe bleeding disorder met its goal in a pivotal late-stage trial, paving the way to enter a challenging market for drug companies.
• Deutsche Bank AG ( $DB): Likely to refrain from a second share buyback this year after its first quarterly loss in four years.
• Blackstone Mortgage Trust Inc. ( $BXMT): Cutting its dividend by 24% as defaults increase and borrowers struggle with payments or refinancing.
• CrowdStrike Holdings Inc. ( $CRWD): Said a bug in a safety mechanism caused flawed data to go out in a botched update, leading to last week’s massive IT outages.