Stock Market Today: Dow, S&P 500, Nasdaq Sink as Microsoft Plunge Sparks Tech Sell-Off
U.S. stocks took a steep dive on Thursday, with the Nasdaq leading losses after a sharp post-earnings drop in Microsoft rattled confidence in the AI-driven tech trade. The tech-heavy index fell nearly 2% in mid-morning trading, on track for its worst day in months as investors reassessed how much spending is too much when it comes to AI.
The S&P 500 fell roughly 1% as weakness spread beyond megacap tech, while the Dow Jones Industrial Average lost close to 1% as industrial and financial names also retreated. The broad sell-off marks a shift in tone after weeks of AI-fueled momentum, with markets now questioning whether surging capital expenditures are running ahead of near-term returns.
Market Movers:
- Microsoft (MSFT) -12%: Shares plunged after earnings showed higher-than-expected AI-driven capital spending and a slowdown in Azure cloud growth. Investors worried that aggressive investment is pressuring margins just as cloud demand shows signs of cooling.
- Meta Platforms (META) +8%: Meta rallied after delivering strong results and issuing an upbeat revenue outlook despite raising its data center spending plans. Investors took comfort in management’s confidence that operating income will still grow even with heavy AI investment.
- Tesla (TSLA) -2%: Tesla slipped as investors digested a strategic pivot toward robotics alongside its earnings beat. Concerns lingered after the company posted its first annual revenue decline, overshadowing strength in energy storage.
- SAP (SAP) -16%: Shares tumbled after cautious commentary around cloud backlog growth revived fears that AI disruption could pressure enterprise software demand. The results triggered broad weakness across software services peers.
- Royal Caribbean (RCL) +12%: The cruise operator surged after issuing guidance well above expectations, signaling strong consumer travel demand extending into 2026. Higher pricing power and expanding capacity boosted confidence in earnings momentum.
AI Spending Anxiety Hits Tech
The market’s reaction to Microsoft showed a growing investor tension: enthusiasm for AI remains high, but tolerance for runaway spending is fading. Analysts noted that while long-term demand for AI infrastructure appears intact, investors are increasingly focused on the timeline for returns on massive data center investments.
Software stocks compounded the pressure after SAP’s results reignited concerns that AI tools could disrupt traditional enterprise service providers. The sector, which had already lagged chipmakers in the AI rally, saw renewed selling as investors rotated away from perceived risk.
Geopolitics Lift Oil and Gold
Outside equities, geopolitical tensions added another layer of market stress. Oil prices jumped more than 3% as traders priced in the risk of escalation involving Iran and potential disruption to flows through the Strait of Hormuz, a key artery for global crude supply. Gold also pushed higher as investors sought defensive assets, supported by a softer dollar and risk-off sentiment in equities. The move highlights how geopolitical uncertainty is reinforcing demand for traditional safe havens even as rate expectations remain in flux.
Labor Data and Fed Outlook in Focus
Fresh economic data showed weekly jobless claims ticking modestly lower, reinforcing the Federal Reserve’s view that the labor market has stabilized. The data followed the Fed’s decision to hold rates steady, with markets still pricing in potential cuts later this year. However, uncertainty around the timing of easing — and speculation over who will succeed Jerome Powell as Fed chair — continues to cloud the policy outlook. That ambiguity is contributing to heightened volatility across asset classes.
Looking Ahead
With Apple earnings due after the bell and volatility picking up, markets remain highly sensitive to signs of whether AI spending will translate into durable profit growth. If more tech giants echo Microsoft’s margin pressures without matching revenue acceleration, the sector could face further near-term pressure. At the same time, rising geopolitical risks and a shifting rate outlook suggest crosscurrents will stay strong. Investors should brace for continued swings as earnings season and macro uncertainty collide.
