Stock indexes plummet on profit reports from Tesla and Alphabet, raising investor concerns.
U.S. stock indexes saw a wipeout on Wednesday, plunging to their lowest levels since 2022 as Wall Street’s excitement over artificial intelligence technology was dampened by profit reports from Tesla and Alphabet.
The S&P 500 fell 2.3%, marking the sixth decline in the previous six days. There was a 1.2% decline in the Dow Jones Industrial Average and a 3.6% decline in the Nasdaq composite.
Sam Stovall, chief financial strategist at CFRA, stated that while the profit reports from Tesla and Alphabet weren’t disastrous, they did cause investors to wonder if other market heavyweights’ springtime results would fall short of expectations.
“How many letdowns are we likely to witness? Perhaps we should sell now and ask questions later.
One of the biggest names on the market, Tesla plummeted 12.3% after revealing a 45% decline in profit for the spring and missing analyst estimates for its results.
In addition to its electric cars, Tesla has grown to be one of Wall Street’s most valued businesses thanks to its AI projects, such the robotaxi. UBS analysts under Joseph Spak said that’s a difficult business to evaluate because the “challenge is that the time frame, and probability of success is not clear.”
Meanwhile, investors’ tolerance for Alphabet’s significant AI expenditures may be wearing thin.
Despite reporting higher-than-expected profit and revenue for the most recent quarter, Alphabet saw a 5% decline. Under the surface, analysts identified several areas of concern, such as YouTube’s less-than-expected rise in ad revenue. They added that higher spending on AI and other initiatives might limit the amount of revenue it produces.
The bigger issue for Alphabet might have been the sheer amount of gains its stock has already experienced—nearly 50% in the 12 months ending on Tuesday—as a result of analysts’ expectations for sustained expansion.
