AI spending fears and $100 oil send Wall Street sharply lower

Two shocks hit an expensive market

U.S. equities sank Thursday as investors confronted rising technology costs and a fresh energy shock. By late morning, the Nasdaq Composite was down 2.6%, the S&P 500 had lost 1.4% and the Dow Jones Industrial Average was off 1%yahoo. The Nasdaq touched its lowest level since early May, reversing part of a chip-led rebound earlier in the weekreuters +1.

The pressure came from both sides of the economy. Disappointing reactions to Alphabet and Tesla results revived doubts about the returns on vast artificial-intelligence investments, while Brent crude briefly reached $100 a barrel amid attacks near crucial Red Sea shipping routesreuters +1. Decliners outnumbered advancers by more than two to one on both the New York Stock Exchange and Nasdaqtheedgemalaysia.

Strong growth meets a harsher spending test

Alphabet shares fell about 6% to 7% even after the Google parent reported 24% revenue growth and an 82% jump in Google Cloud salesyahoo +1. Investors instead focused on a $15 billion increase in its full-year capital-spending guidance and management's warning that infrastructure investment would rise again next yearyahoo. The reaction showed that rapid AI-linked revenue growth is no longer enough when spending is climbing faster than the market expected.

Tesla dropped more than 12% after reporting negative quarterly free cash flow for the first time in over two yearstheedgemalaysia. Its results also exposed margin pressure and heavy spending on computing infrastructure, Optimus robots and autonomous-driving projectsyahoo. Across the largest technology companies, the selloff erased hundreds of billions of dollars in market value and sharpened questions about whether near-term profits can support elevated valuationsmarketscreener +1.

Oil revives the inflation-and-rates threat

The jump in crude broadened the concern beyond technology. Brent's move to its highest level since late May followed an escalation around the Bab el-Mandeb strait, with investors weighing the risk of disruption to a major trade and energy corridortheedgemalaysia. A sustained rise in fuel costs could keep consumer-price pressure elevated just as markets had hoped for easier monetary policy.

Two-year Treasury yields climbed to a 17-month high, and futures pricing put the probability of a quarter-point Federal Reserve increase at its July meeting near 38%, up from 12% a week earliertheedgemalaysia. That combination—costlier capital for growth stocks and costlier energy for the wider economy—left investors with fewer places to hide. Honeywell and Lockheed Martin advanced on company-specific news, but those gains were exceptions in a session defined by a sudden repricing of both AI ambition and geopolitical riskyahoo +1.