AI spending and $100 oil spark Wall Street's sharp tumble
Wall Street tumbled Thursday as rising oil prices and heavy A.I. spending plans from Alphabet and Tesla helped spark a broad sell-off. The S&P 500 fell 1.2%, the Dow dropped about 1%, and the Nasdaq sank more than 2% after Brent crude topped $100 a barrel amid Middle East tanker attacks and AI return-on-investment fears.
Key Takeaways
- The S&P 500 fell 1.2%, the Dow about 1%, and the Nasdaq more than 2% on Thursday.
- Brent crude jumped 7% to settle at $100.69 after Red Sea tanker attacks.
- Tesla sank 14.5% after a profit miss; Alphabet fell 7.1% on rising AI capex concerns.
- Higher oil lifted the 10-year yield and raised odds of a Federal Reserve rate hike.
What drove Thursday's stock market sell-off?
Two forces hit at once. Investors dumped shares after Alphabet and Tesla reported results that raised fresh questions about how much Big Tech will spend on artificial intelligence—and whether those bets will pay off.
At the same time, Brent oil, the international benchmark, jumped 7% to settle at $100.69 a barrel and touched $102 during the day, according to AP News. Attacks on two Saudi oil tankers in the Red Sea, claimed by Iran-backed Houthi rebels, threatened another key shipping route for crude beyond the Strait of Hormuz.
The S&P 500 lost 90.66 points to close at 7,408.30—its worst session in a month—while the Dow fell 506.93 to 51,711.65 and the Nasdaq sank 553.21 to 25,137.69.
Why did Alphabet and Tesla weigh so heavily on tech?
Alphabet fell 7.1% even after stronger-than-expected profit and revenue. Investors focused on capital spending: the Google parent's AI-related investments last quarter nearly doubled to about $45 billion, and it raised its full-year capex forecast.
CEO Sundar Pichai said AI helped cloud revenue growth accelerate to 82% last quarter. Still, unease about AI returns has been shaking the industry in recent weeks, a theme tracked across our Future Tech & AI Wonders coverage.
Tesla tumbled 14.5% after weaker-than-expected profit. CEO Elon Musk also called 2026 a "massive capex year," pointing to Optimus robots, robotaxis, and data centers—another signal that heavy spending remains front and center for investors.
How could $100 oil reshape rates and inflation?
Rising oil raises business costs and can leave consumers with less to spend. The 10-year Treasury yield climbed to 4.69% from 4.67% late Wednesday, near its highest level in about a year and a half, as inflation fears returned.
Traders now see about a 36% chance the Federal Reserve will hike rates at its next meeting, up from nearly 12% a week earlier, CME Group data cited by AP show. U.S. average gasoline sits at $4.09 a gallon, up from $3.93 a month ago, AAA figures show.
Airline stocks felt the fuel squeeze hard. American Airlines fell 8.4% and Southwest Airlines lost 6.2%, even as both reported better-than-expected profits for the latest quarter.