Stocks Slide as Alphabet, Tesla Earnings Fan AI Spending Worries and Oil Surges

(WS News) – US stocks fell sharply on Thursday as oil prices surged following an escalation in the Middle East and quarterly results from Alphabet and Tesla stoked fresh concerns about the pace of artificial intelligence spending, with the Nasdaq Composite dropping more than 2 percent.

The Dow Jones Industrial Average lost 506.93 points, or 0.97 percent, closing at 51,711.65, while the S&P 500 dropped 1.21 percent. Alphabet shares fell 7 percent and Tesla dropped 14 percent following their earnings reports, with Alphabet’s results fueling investor worry over rising AI infrastructure costs. Tesla is expected to report its first quarterly cash burn in more than two years, as spending on AI and robotics has climbed toward $25 billion this year, outpacing cash generated by its core automotive and energy businesses.

Oil prices added further pressure after Yemen’s Houthi rebels claimed attacks on two Saudi Arabian oil tankers in the Red Sea, raising fears the conflict in the Middle East could disrupt shipping beyond the Strait of Hormuz. The selloff followed a strong start to second-quarter earnings season, with nearly 88 percent of the roughly 66 S&P 500 companies that had reported by midweek beating bottom-line estimates, according to FactSet, including strong results from General Motors and 3M.

Asian markets were mixed heading into Friday, with Japan’s Nikkei 225 and South Korea’s Kospi both higher even as investors continued to weigh the twin risks of Middle East tensions and AI spending scrutiny heading into a fresh batch of earnings from Intel and other major companies later in the week.