Alphabet Selloff Jolts Markets as AI Growth Expectations Falter

The tech-heavy Nasdaq Composite led the retreat, falling 1.38% to 26,184.72, while the S&P 500 slipped 0.30% to 7,720.39. Alphabet shares plunged over 12% to $281.73, marking the second-largest single-session loss for any company on record. The drop followed a revenue shortfall as Google’s search growth struggled against the less profitable economics of AI-driven search queries.

Caterpillar joined the slide, dropping 9.3% to $647.39 after quarterly sales failed to meet Wall Street targets. Meanwhile, the broader economic picture remains complex; the Commerce Department reported a 3.4% rise in third-quarter GDP, even as the core personal-consumption expenditures price index climbed 3.1% in September. While Federal Reserve Chair Kevin Warsh signaled that AI infrastructure is not currently fueling inflation or job losses, markets remain skittish regarding the debt sustainability of cloud-computing firms like CoreWeave and Nebius.

Despite the tech malaise, the pharmaceutical sector provided a rare bright spot. Eli Lilly climbed 6.6% to $1,373.70, and Merck rose 3.8% to $146.33, both buoyed by strong demand for core drug products. Consolidation also persisted, highlighted by DoorDash’s $17 billion deal to acquire Instacart and Thrive Capital’s $7.6 billion bid for ADT.