US stocks slide as Google parent's revenue miss revives AI spending jitters

US stock prices retreated on Thursday, with investors reassessing big tech’s massive AI spending spree as they digested high-profile earnings, crucial inflation data and the US Federal Reserve’s policy decision. All three major US stock indexes were in negative territory, with the Nasdaq dragged sharply lower by tech and tech-related megacaps in the wake of Alphabet’s disappointing quarterly results released late Wednesday. In contrast, the smallcap Russell 2000 advanced 0. 8 per cent. Semiconductor stocks were poised to snap their four-day winning streak, dropping 2. 0pc as investors sought to distinguish between companies that can fund their lofty AI ambitions from those that burn through cash and borrow funds to realise their ambitions. Alphabet was in the latter camp following its quarterly report released late on Wednesday.

The Google parent’s revenue miss was compounded by its accelerated AI-related cash burn. Its shares slid 13. 2pc. “A risk-off day like this, with small caps outperforming, is a good sign that thus far the market’s interpretation of cracks in the AI story doesn’t mean cracks in every corner of the market,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “There’s plenty of other places to go with your money outside of the AI trade that have pretty decent prospects. ” On Wednesday, Federal Reserve policymakers chose to hold US rates steady, acknowledging that while price pressures remain “elevated”, the central bank will decide on its next move as it “accumulates more information”. A raft of economic data released on Thursday answered that call, with a first take on third-quarter GDP that showed the US economy grew at a faster-than-expected pace in the third quarter, while price growth continued to gain heat with a…