Alphabet Heads for Its Worst Day on Record, Shedding About $500 Billion, as Nasdaq Slides

The pain is concentrated in AI-linked and cyclical names reporting this week. ServiceNow and Fortinet each lost more than 20 percent, Caterpillar fell as much as 12 percent after a weak fourth-quarter sales outlook despite beating estimates, and Sprouts Farmers Market dropped 18 to 20 percent after cutting its profit forecast and launching price cuts, the live blog said. Marvell fell 11 percent on reports it is in talks to buy Lumentum, which rose 5 percent. Eli Lilly gained about 4 percent premarket on strong GLP-1 results.

Why are investors selling Alphabet?

The worry is the cost of AI. Capital spending reached $51.4 billion in the quarter, and the company expects about $200 billion this year and $300 billion in 2027, Fortune reported. David Wagner of Aptus Capital Advisors told the magazine, "The problem is everything else," meaning the parts of the business outside Cloud. Bernstein's Mark Shmulik was blunter than the cloud bulls: Alphabet is probably an AI winner, he wrote, but not today.

Some analysts called the drop overdone. Dan Ives of Yorkville called the cloud result the one investors had been waiting for, and Luke Lango dismissed the $8.7 billion paper loss on equity stakes, which cut 55 cents from earnings per share, as accounting noise. Lango himself framed the issue as how to pay for the spending, not a lack of demand.

What to watch into the close?

Does the Alphabet loss narrow in the afternoon, and does the selling spread to other big spenders? Healthy growth data and a Fed leaning towards a hike have already tested the AI trade this month. Reports of Marvell's talks to buy Lumentum were the one deal headline, and only Lumentum's shareholders were pleased. How the Nasdaq closes will show whether Thursday is a one-stock repricing or the start of a wider one.