Wall Street ended sharply lower on Thursday, with the Nasdaq dragged to its lowest since November by losses in Microsoft MSFT.O , Amazon AMZN.O and other tech heavyweights after Alphabet GOOGL.O said it could double capital spending on AI in the race to dominate the emerging technology. Shares of Alphabet fell 0.55% after the Google parent said it plans as much as $185 billion in capex in 2026. Together, it and its Big Tech rivals are expected to collectively shell out more than $500 billion on AI this year.
Adding to recent losses, Microsoft dropped 5%, Palantir PLTR.O lost 6.8% and Oracle ORCL.N fell 7%. Amazon AMZN.O lost 4.4% during regular trading and then tumbled another 10% after the closing bell, joining its Big Tech peers in projecting massive capital expenditures in 2026. It was the latest sign that tech companies will not hit the brakes anytime soon on hefty AI investments. Shares of chipmaker Nvidia NVDA.O , which stands to benefit from increased industry spending on AI, declined 1.4%.
Investors in recent months have grown more wary of heavy spending on AI, awaiting stronger signs those investments are actually boosting revenue and profits. Investors this week have also worried that rapidly improving AI tools could eat into demand for traditional software, squeezing profit margins across the sector.
Software and data services stocks added to recent losses, with ServiceNow NOW.N down 7.6% and Salesforce CRM.N losing almost 5%. The S&P 500 software and services index .SPLRCIS fell 4.6%, down for a seventh straight session. Qualcomm QCOM.O slid 8.5% after forecasting second-quarter revenue and profit below estimates. The CBOE volatility index .VIX , Wall Street’s “fear gauge,” briefly hit the highest in over two months.
As traders dialed back exposure to pricey AI stocks, the market’s rotation into relatively cheaper stocks gained steam in recent days. The S&P 500 value index .IVX dipped 0.9%, but remained in positive territory for the week. The S&P 500 growth index .IGX was down more than 4% for the week. The S&P 500 declined 1.23% to end the session at 6,798.40 points. The Nasdaq declined 1.59% to 22,540.59 points, while the Dow Jones Industrial Average declined 1.20% to 48,908.72 points. Nine of the 11 S&P 500 sector indexes declined, led lower by materials .SPLRCM , down 2.75%, followed by a 2.59% loss in consumer discretionary .SPLRCD .
Snap SNAP.N topped fourth-quarter revenue estimates, but its shares declined more than 13%. Estee Lauder EL.N shares fell 19% as the Clinique owner forecast annual results below estimates. Fashion company Tapestry TPR.N rose 10% after raising its annual profit forecast, while Hershey HSY.N climbed 9% on a better-than-expected annual profit forecast.
The number of Americans filing new applications for unemployment increased more than expected for the week ended January 31, while job openings dropped to the lowest level in more than five years in December. Declining stocks outnumbered rising ones within the S&P 500 .AD.SPX by a 1.8-to-one ratio. The S&P 500 posted 44 new highs and 10 new lows; the Nasdaq recorded 113 new highs and 425 new lows.
Reporting by Pranav Kashyap and Twesha Dikshit in Bengaluru, and by Noel Randewich in San Francisco; Editing by Shinjini Ganguli, Anil D’Silva, Maju Samuel and David Gregorio.
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