Alphabet’s plunge rattles Wall Street as investors rethink AI darlings

On Thursday, October 29, U.S. equities slipped after Google’s parent Alphabet suffered a roughly 12% one‑day drop, its worst since the stock began trading more than two decades ago. The company did deliver higher revenue, but investors focused on softer‑than‑hoped trends in its core advertising business and lingering doubts about the payoff from aggressive AI spending. That was enough to send the shares sharply lower and drag down the major indices, despite gains in most individual stocks.

Other mega‑cap tech names, notably Microsoft, held up better as demand for AI‑driven cloud services continued to support earnings. Markets are effectively rewarding companies that can turn huge AI capital expenditures into visible revenue growth, while punishing those where the path to profits looks less certain. The S&P 500 finished modestly in the red, but the episode underscored how index performance can be dominated by a handful of giants. Meanwhile, the 10‑year Treasury yield eased back below 5%, taking some pressure off valuations. For equity investors, the AI theme remains central – but stock selection within the sector is becoming far more discriminating.