US STOCKS-Wall Street slides to over one-week low as Big Tech's soaring AI budgets trigger flight

"People have just been throwing money and now they've reached a certain level where they're starting to look under the hood and see what's really going on," said Max Wasserman, Co-founder and Senior Portfolio Manager at ​Miramar Capital. Also weighing on markets was a drop in software stocks, after SAP's cautious cloud outlook and ServiceNow's post-earnings slide of 10% deepened investor concerns that traditional software firms ‍risk losing ground to rising competition from AI players.

Wall ‌Street's main indexes slid to over one-week lows on Thursday, as another wave of hefty AI-related spending announcements by mega-cap tech companies rattled investors. Microsoft slumped 12.2% after the software giant's cloud revenue failed to impress and stoked fears the hefty outlays behind its OpenAI alliance were ⁠not translating into monetization fast enough.

Tesla also reversed course, down 2.3%, after the electric-vehicle maker outlined plans to more than double capital expenditures to a record level. "People have just been throwing money and now they've reached a certain level where they're starting to look under the hood and see what's really going on," said Max Wasserman, Co-founder and Senior Portfolio Manager at ​Miramar Capital.

Also weighing on markets was a drop in software stocks, after SAP's cautious cloud outlook and ServiceNow's post-earnings slide of 10% deepened investor concerns that traditional software firms ‍risk losing ground to rising competition from AI players. Salesforce was down 7.2%, while Adobe lost 3.9% and cloud security firm Datadog fell 8.3%.

At 11:18 a.m. ET, the Dow Jones Industrial Average fell 204.00 points, or 0.42%, to 48,811.60, the S&P 500 lost 78.68 points, or 1.13%, to 6,899.35 and the Nasdaq Composite lost 502.65 points, or 2.11%, to 23,354.80. Meta bucked the trend, jumping almost 8%, as the social media giant paired an upbeat ⁠revenue forecast ‌with a 73% jump in this year's capex ⁠budget.

The so-called "Magnificent Seven" stocks have been at the heart of the U.S. bull market, as investors wager that their hefty AI investments will drive a new phase of earnings growth. The group is projected to deliver ‍a 21.5% earnings increase in the fourth quarter, compared with a 5.3% gain for the rest of the S&P 500, according to data compiled by LSEG.

But with capital expenditures and AI-related outlays climbing far ​faster than the revenue they are generating, markets are starting to question whether the payoff from these multibillion-dollar AI bets will arrive quickly enough to justify valuations. "They're (investors) starting ⁠to wonder what type of growth outlook and what type of real return on capital they're going to get from this," Wasserman added.

Apple was flat, ahead of its results after markets close. The energy index jumped 1.5% on the ⁠back of surging oil prices, with Brent crude futures hitting a near six-month high on rising concerns about a possible U.S. military attack on Iran.

EARNINGS CHUG ON In other notable earnings, Caterpillar and Mastercard added 2.8% and 1.6%, respectively, after posting a higher profit for the quarter.

Defense contractor Lockheed Martin rose 5% after forecasting 2026 earnings above Wall Street expectations. Southwest ⁠Airlines' shares advanced 12.9% after the airline forecast a stronger-than-expected annual profit.

Bellwether IBM jumped 6% after beating estimates in its fourth-quarter earnings. FED DECISION AS EXPECTED

Chair Jerome Powell said on ⁠Wednesday the Fed would remain data-dependent, with upside ‌risks to inflation and downside risks to employment diminishing. Domestic data showed initial jobless claims fell slightly to 209,000 last week.

Among other stock moves, rare-earth miners slid following a report the Trump Administration would step back from critical mineral price floors. USA Rare Earth fell 12.7%, MP ⁠Materials was down 11%, while Critical Metals and United States Antimony dropped over 15% each.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)