Tech Giants Tumble: AI Spending Sparks Market Selloff

The S&P 500 hit a two-week low and Nasdaq fell to a two-month low as AI investment concerns rattled investors. Alphabet and Qualcomm's spending forecasts triggered the selloff. Software stocks tumbled, deepening the market's decline, while small-cap and value stocks gained. Market volatility surged amid tech sector turbulence.

The S&P 500 dropped to its lowest in over two weeks, and the Nasdaq sank to a more than two-month low on Thursday, as concerns surrounding AI investments weighed heavily on investors. Shares of Alphabet fell 4.2% after the Google parent announced plans to double its capital expenditure this year, sparking fears over aggressive spending in the AI race.

Qualcomm saw an 8.2% decline following its forecast of lower-than-expected revenue and profit for the second quarter. The negative sentiment spread to tech giants like Microsoft and Tesla, which saw decreases of 3.4% and 3.7%, respectively. Big Tech's collective investment, expected to exceed $500 billion this year, has reignited worries about valuation and returns, particularly after lackluster earnings such as those reported by Microsoft.

In response, investors are moving away from expensive tech stocks towards more affordable market segments. As a result, indices like the S&P 600 small-cap, S&P 500 value, and S&P 400 mid-cap have gained traction. Meanwhile, the CBOE volatility index saw a rise, highlighting growing uncertainty. Despite the downturn, consumer staples remained the only sector trading positively.

(With inputs from agencies.)