Alphabet Shares Slump Toward Record Daily Loss, Pulling Wall Street Lower

Shares of Alphabet, the parent company of Google and YouTube, were headed for what could be their worst day since the stock began trading more than 20 years ago, weighing on U.S. markets on Thursday. The company reported summer growth that fell short of analyst forecasts, which revived questions about whether its massive investments in artificial intelligence will pay off.

Alphabet's stock was down 11.8% in late-morning trading. As of 11:15 a.m. Eastern time, the S&P 500 had slipped 0.3% and was on pace for its first loss in four days. The Nasdaq composite dropped 1.2%, while the Dow Jones Industrial Average gave up a more modest 0.2%, or 104 points. Most other stocks on Wall Street were actually rising, and the S&P 500 would have finished higher for the day without Alphabet's decline.

The company said late Wednesday that it burned through more cash last quarter, as measured by free cash flow, after its purchases of property and equipment topped $51 billion. As one of the largest and most influential companies on Wall Street, Alphabet was under pressure to at least meet growth expectations given the scale of its AI spending.

The concerns reach beyond a single company. The industry has been caught up in a rush to build data centers and stock them with AI chips, and investors worry the technology may not deliver the profit and productivity gains hoped for. Future data center spending also faces pressure because borrowing money to buy more chips has become so expensive.

Elsewhere, a number of companies climbed after reporting stronger summer profits than analysts expected. KLA, whose equipment is used to make semiconductors, rose 6.7%. Eli Lilly gained 6.4%, Mastercard added 4.7% and Merck rose 5.1%. DoorDash gained 6.6% after announcing a deal to buy Instacart, valuing it at $17 billion, and reporting profit and revenue that topped forecasts. Norwegian Cruise Line Holdings jumped 14.1% after beating profit and revenue expectations, helped in part by passengers spending more onboard than the company anticipated.

Expectations for profit growth among U.S. companies remain high. That backdrop helped the S&P 500 set a record earlier this month despite high interest rates and other worries.

In the bond market, Treasury yields eased after a mixed set of economic reports. A preliminary report suggested the economy may have grown faster over the summer than economists expected, driven by consumer spending and business investment in AI. Americans' income growth was weaker than forecast in September, however, and a measure of inflation worsened. Fewer workers applied for unemployment benefits last week, which could point to limited layoffs nationwide.

The yield on the 10-year Treasury fell to 4.98% from 5.05% late Wednesday. It has generally been retreating since topping 5.30% earlier this month, when it touched its highest level since 2002. A 2% drop in the price of Brent crude to $109.42 a barrel also helped pull yields lower.

Overseas, European indexes rose after the European Central Bank held interest rates steady. Bank President Christine Lagarde also said she will resign in February, nine months before the end of her term. Asian markets were mixed. South Korea's Kospi fell 1.2%, led by a 4.1% decline in Samsung Electronics, even though the company reported a jump in profit.