Stocks fell sharply on Thursday as a jump in oil prices collided with fresh worries about how much big technology companies are spending to build out artificial intelligence. A surge in crude past $100 a barrel, driven by escalating tensions in the Middle East, stoked inflation fears and pushed Treasury yields to their highest levels of the year. At the same time, disappointing reactions to earnings from Alphabet and Tesla dragged the tech-heavy Nasdaq to its worst session in a month. All three major indexes closed in the red, with losses steepening into the afternoon.
What Moved Markets
The Dow Jones Industrial Average fell 507.59 points, or 0.97%, to close at 51,710.99. The S&P 500 dropped 90.67 points, or 1.21%, to finish at 7,408.29. The Nasdaq Composite bore the brunt of the selling, sliding 553.21 points, or 2.15%, to 25,137.69.
The main driver was a rethink of the AI trade. Investors have grown more cautious about the enormous sums that “hyperscalers” – the largest cloud and technology firms – are pouring into AI infrastructure, and results this week gave those doubts new fuel. Rising oil added a second headwind. With Brent crude topping $100 a barrel on geopolitical worries, traders bet that higher energy costs could keep inflation sticky, complicating the Federal Reserve’s path just days before its July 28-29 meeting. Bond yields climbed in response, which tends to weigh most heavily on richly valued growth stocks. Not everything fell, though: energy shares gained as oil rose, and defensive corners such as health care and utilities held up better than the broad market.
Notable Movers
Tesla (TSLA) tumbled about 14%, the biggest drag on the Nasdaq, after the automaker reported second-quarter earnings fell to 33 cents per share, well short of Wall Street’s expectations, and posted negative free cash flow as it ramps up AI-related investment.
Alphabet (GOOGL) slid roughly 6% even as its Google Cloud revenue jumped 82% from a year earlier. The parent of Google spooked investors by lifting its 2026 capital-spending forecast to between $195 billion and $205 billion, up from a prior range of $180 billion to $190 billion, reigniting concerns about the payoff on heavy AI outlays.
Microsoft (MSFT) fell about 2.2%, joining fellow AI spenders Meta and Amazon in the red as the sell-off in large-cap technology broadened.
Lockheed Martin (LMT) bucked the trend, jumping about 6% after the defense contractor beat estimates with a profit of $7.94 per share on revenue of $20.06 billion, both ahead of forecasts.
Looking Ahead
With the Federal Reserve meeting now just days away, investors will be watching for any signal on interest rates, especially with oil prices and bond yields pushing higher. The path of crude remains a wild card given the Middle East backdrop, and more heavyweight earnings are still to come, including results that will test whether the market’s unease about AI spending spreads further. For retail investors, the takeaway is that even strong headline growth, as seen at Alphabet, can trigger selling when it comes attached to bigger spending plans. Expect continued volatility until there is more clarity on rates and energy costs.