The Nasdaq shed 1.36% while the S&P 500 and Dow Jones Industrial Average also slipped, contrasting with gains in the small-cap Russell 2000 as capital rotated away from mega-cap tech. Beyond Alphabet's disappointing revenue, software providers Fortinet and ServiceNow both plunged over 20% following their quarterly releases. Despite these high-profile tech pullbacks, broader corporate health held up, with 81% of reporting S&P 500 companies surpassing profit forecasts alongside a stronger-than-expected 3.4% annualized third-quarter gross domestic product growth rate.
Key points
Disappointment over mega-cap artificial intelligence expenditures prompted market partici…: Disappointment over mega-cap artificial intelligence expenditures prompted market participants to diversify into small-cap stocks.
Resilient macroeconomic growth and persistent oil-driven inflation continue to complicate…: Resilient macroeconomic growth and persistent oil-driven inflation continue to complicate the Federal Reserve's interest rate outlook.
Broad corporate earnings strength persisted, with 81% of reporting S&P 500 companies beat…: Broad corporate earnings strength persisted, with 81% of reporting S&P 500 companies beating expectations despite prominent tech declines.
Sources checked by our analysis pipeline: 1
The Nasdaq fell 1.36% to 26,188.08, while the S&P 500 declined 0.31% to 7,721.02. The Dow Jones Industrial Average slipped 0.25% to 52,345.80. In contrast, the smallcap Russell 2000 advanced, suggesting investors were finding opportunities beyond the crowded AI trade.
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Alphabet's results put AI spending under scrutiny
Alphabet shares slumped after the Google parent reported disappointing quarterly revenue and accelerated AI related cash spending. The stock's decline weighed on the communication services sector, while semiconductor stocks snapped a four day winning streak, Reuters reported.The sell off reflected growing scrutiny of companies pursuing expensive AI ambitions, particularly those relying on borrowing and heavy cash outflows to fund their expansion.
Also Read: Cash takes centre stage as investors rethink AI spending boom
"A risk off day like this, with small caps outperforming, is a good sign that thus far the market's interpretation of cracks in the AI story doesn't mean cracks in every corner of the market," Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky.
Softening customer demand across key markets in Hong Kong and the Chinese Mainland pressured the financial performance of AIA Group during the third quarter. The regional insurance giant experienced a reduction in future profit generation from newly acquired policies, reflecting localized market headwinds. This pullback affects a vital performance barometer that market analysts monitor to project the long-term expansion of the business.
Stablecoin issuers acted swiftly after Binance reported a major security breach affecting its ecosystem. The decisive move targets illicit movements across the network and prevents unauthorized actors from liquidating digital assets. This coordination highlights how centralized issuers can intervene directly on-chain during major exchange incidents.
Security researchers and industry analysts project that hot wallet losses range between $2 billion and $5.7 billion, which would mark one of the largest cyberheists ever recorded. Stablecoin issuers moved rapidly to limit the damage by freezing over $2.3 billion in assets connected to the compromised accounts. Exchange leadership continues to assert that user balances will be made whole despite ongoing questions about who executed the attack.