Stock Market Today: Nasdaq Plunges as Google Crashes 13%, AI Spending Fears Return

Key takeaways

• Nasdaq slides as Alphabet shares plunge 13%
• AI spending concerns pressure technology and software stocks
• Strong economic data complicates Federal Reserve rate outlook

US stocks fell sharply on Thursday, October 29, as a massive selloff in Alphabet dragged the Nasdaq lower and revived concerns about whether the artificial intelligence boom can generate sufficient returns to justify its enormous infrastructure costs.

The Nasdaq Composite dropped 1.64% to 26,117.47 by 9:56 a.m. Eastern Time, while the S&P 500 declined 0.51% to 7,704.55. The Dow Jones Industrial Average fell 0.31% to 52,311.92.

Alphabet shares plunged approximately 13%, threatening to erase more than $500 billion in market value as investors reacted to disappointing advertising results and accelerating AI infrastructure spending.

The decline reversed the earlier market recovery, highlighting how quickly sentiment has shifted from enthusiasm about AI demand to concerns about profitability.

Google Stock Crashes as AI Spending Drains Cash Flow

Alphabet led Thursday's technology selloff despite reporting impressive growth across its cloud computing business.

Quarterly revenue increased 25% to $127.6 billion, while Google Cloud sales more than doubled to $30.7 billion. However, the company's advertising business missed expectations, and capital expenditures reached $51.4 billion.

The spending surge contributed to negative free cash flow of approximately $9.1 billion, raising questions about how quickly Alphabet can turn its AI investments into sustainable cash generation.

The company's earlier earnings report also revealed slowing search advertising growth, despite increasing demand for AI-powered services.

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The losses extended beyond Google. ServiceNow plunged approximately 23%, while cybersecurity company Fortinet declined nearly 22% as investors reassessed earnings expectations across the software industry.

The Philadelphia Semiconductor Index also fell 1.8%, interrupting a four-session rally fueled by strong demand for AI chips and computing equipment.

Microsoft's $25 Billion Bond Sale Highlights AI Financing Concerns

Microsoft shares slipped approximately 0.5% despite reporting strong quarterly results and continued growth in its Azure cloud business.

The company was also preparing to raise at least $25 billion through a major US bond offering, its first such transaction since 2017.

The planned issuance comes as technology companies accelerate spending on data centers, chips and supporting infrastructure.

Microsoft, Amazon and Alphabet could collectively spend nearly $600 billion on AI infrastructure during 2026, creating growing pressure to demonstrate measurable financial returns.

However, Microsoft's financial position remains significantly stronger than that of smaller AI infrastructure providers because it continues generating substantial free cash flow and maintains top-tier credit ratings.

The broader borrowing boom has nevertheless raised concerns about how lenders and investors will respond if demand for computing capacity grows more slowly than expected.

Credit-market pressure has already become visible at specialized AI cloud companies.

For example, CoreWeave's bond yields previously approached 15%, demonstrating the higher returns investors can demand from heavily leveraged infrastructure businesses.

The contrast reinforces the market's growing focus on financing costs rather than revenue growth alone.

Fed Rate Outlook Adds Pressure as Healthcare Stocks Rally

Thursday's selloff followed the Federal Reserve's decision to leave its benchmark interest-rate range unchanged at 3.75%–4.00%.

New economic data showed that US growth exceeded expectations during the third quarter, while the latest Personal Consumption Expenditures inflation figures remained consistent with forecasts.

The combination strengthened expectations that policymakers could maintain restrictive monetary conditions, complicating the outlook for companies financing long-term investments.

As concerns about Treasury yields have demonstrated, higher borrowing costs can reduce the attractiveness of growth stocks whose expected profits lie years in the future.