Stocks Hit by AI Spending Worry as Microsoft Sinks: Markets Wrap

(Bloomberg) — Wall Street was roiled by a tech rout as megacaps showed no signs of easing up on artificial-intelligence spending even as doubts persist about demand to justify all that capital. Big moves in commodities saw gold plunging as oil soared. Bitcoin dipped below $85,000.

Stocks fell from near-record levels, with the S&P 500 down 1.1%. The Nasdaq 100 sank 1.8%. Microsoft Corp. tumbled 12% — its worst selloff since the onset of the pandemic — on concern it could take a while for its investments to pay off. Meta Platforms Inc.’s solid outlook eased worries about spending plans on AI. Apple Inc. reports results later Thursday.

Wall Street is gearing up for a borrowing bonanza to bankroll AI projects that could push February corporate bond sales to a record, even as warnings against complacency continue to percolate. International Business Machines Corp. is selling dollar and euro bonds after reporting solid results.

The “Magnificent Seven” tech giants have led the stock market higher for much of the past three years. But that reversed at the end of 2025 as Wall Street grew skeptical of the hundreds of billions of dollars the companies are spending to develop AI and when the returns on those investments will materialize.

“Investors are selling because they probably realized they are not going to make as much money on the AI theme as they hoped for half a year ago,” said Matt Maley at Miller Tabak & Co. “The AI theme is overcrowded, and investors are revaluing the AI trade, so they are re-weighting big-tech stocks in their portfolios.”

The day after the Federal Reserve decided to stand pat saw an uneventful batch of economic data, with bonds little changed. The dollar barely budged while still heading for its worst month since the tariff meltdown in April.

Gold reversed an earlier rally that took the precious metal to a record above $5,500. Brent crude topped $71 after President Donald Trump warned Iran to make a nuclear deal or face military strikes.

Robust forecasts will be needed to justify a rotation from tech that is notable after years that saw a handful of megacap AI firms do the heavy lifting. Traders are questioning the durability of the AI trade, prompting money managers to diversify away from the bull market’s longtime winners.

“The AI theme, and who benefits from the AI capex going forward, remains the largest driver of factor and market cap calls,” said Dennis DeBusschere at 22V Research. “The macro backdrop is supportive of a broadening out of returns, but the main driver of returns has been related to AI themes.”

With the record-setting stock rally loading high profit expectations into share prices, investors punishing companies heavily for disappointments. The average post-results stock move relative to the benchmark index show a drop of half a percentage point — the first negative reading in two years.

Corporate Highlights:

Meta Platforms Inc.’s better-than-expected sales outlook helped ease Wall Street concerns about plans for unprecedented spending on artificial intelligence this year. Microsoft Corp. plunged after reporting record spending and slowing cloud sales growth, fueling investor concerns that it could take longer than expected for the company’s AI investments to pay off. Nvidia Corp., Microsoft Corp. and Amazon.com Inc. are in discussions to invest as much as $60 billion in OpenAI as part of a major new funding round, the Information reported, citing people familiar with the talks. Nvidia hasn’t yet received any orders from Chinese customers for its H200 AI chips as Beijing is still deciding whether to allow imports of the US firm’s components, according to its chief executive officer. Tesla Inc. will spend over $20 billion on a dramatic reshuffling of factory lines reflecting Elon Musk’s repositioning of the carmaker coming off a multiyear sales slump. Tesla reported fourth-quarter profit that surpassed expectations. International Business Machines Corp. reported quarterly sales that topped analysts’ estimates on strong growth for its closely watched software unit. ServiceNow Inc. gave a sales outlook in the current quarter that was stronger than expected, but failed to reduce investor anxieties that artificial intelligence will disrupt the software maker’s business. Lam Research Corp. forecast adjusted earnings per share for the third quarter that beat the average analyst estimate Caterpillar Inc. got an earnings boost from selling power generation equipment to AI data centers in its fourth quarter, helping drive quarterly results that topped Wall Street’s expectations. Honeywell International Inc.’s outlook for 2026 topped Wall Street estimates, while the spinoff of its aerospace unit is set to happen earlier than expected. Starbucks Corp. sees sales and earning growth over the next few years as its turnaround plan takes hold. Mastercard Inc. reported fourth-quarter earnings that beat estimates as consumers continued to turn to the company’s cards as a payment option. Comcast Corp. reported revenue and profit in the fourth quarter that met or surpassed Wall Street expectations, even as it continued to lose cable TV and internet customers. Lazard Inc. named Tracy Farr chief financial officer as it reported fourth-quarter revenue and profit that beat analysts’ estimates. Blackstone Inc. reported a surprise jump in distributable earnings as dealmaking reignited and reached what President Jon Gray calls “escape velocity.” For executives, that unleashed some of their richest rewards since the pandemic. Lockheed Martin Corp. said it reached a deal with the Pentagon to increase THAAD interceptor production, as the company issued an upbeat guidance for 2026 amid record deliveries of its F-35 fighter and growing missile sales. Royal Caribbean Cruises Ltd.’s results showed as demand for cruise holidays keeps accelerating, which could see the liner add as many as six additional ships to its fleet. Joby Aviation Inc. is raising $1 billion from the sale of shares and convertible bonds, as the air taxi company seeks to double production capacity by 2027. Air India Ltd. firmed up an order for additional 30 Boeing Co. 737 Max aircraft in an aggressive fleet expansion as air travel demand surges in the world’s most-populous country. VSE Corp., a provider of aftermarket parts and services to the aviation industry, agreed to buy closely held Precision Aviation Group for about $2.025 billion in a cash-and-stock deal. Dow Inc. plans to cut about 4,500 jobs as it aims to simplify and streamline operations. International Paper Co. plans to break up and spin off its European packaging operations. Deutsche Bank AG closed out a record year for profit with higher trading income and a new share buyback, a boost to Chief Executive Officer Christian Sewing a day after a raid of its Frankfurt offices raked up memories of the lender’s past troubles. Deutsche Bank and its asset manager DWS Group are considering taking a significant minority stake in a Fosun International Ltd.-controlled life insurance consolidator, people familiar with the matter said, potentially marking the German lender’s return to the market. BBVA SA plans to issue two significant risk transfer deals linked to around €7 billion ($8.4 billion) of assets, according to people with knowledge of the matter ING Groep NV reported quarterly profit that beat estimates and it also lifted the profitability guidance for 2027. SAP SE plunged as a key indicator for future sales slipped to a level that Chief Executive Officer Christian Klein previously said would be a “disappointment,” adding to worries of how artificial intelligence will disrupt the software industry. Nokia Oyj’s fourth-quarter adjusted profit fell about 3% from a year earlier, as the Finnish mobile equipment maker streamlines its business to focus on connections that enable artificial intelligence growth. Roche Holding AG reported disappointing revenue for a blockbuster eye medicine and lackluster growth predictions for the year. AstraZeneca Plc will invest $15 billion in China through 2030 to expand medicines manufacturing as well as research and development, in a further commitment to the UK drugmaker’s already sizable presence in the mainland. Remy Cointreau SA returned to growth as demand for its spirits picked up in Europe and the US, offsetting weakness in China and bolstering hopes that a slump in Cognac sales is starting to ease. EasyJet Plc reported a first-quarter loss before tax of £93 million ($128 million), exceeding analyst estimates, though its chief executive officer said summer sales are looking strong after a record January booking period. Swedish fast-fashion retailer Hennes & Mauritz AB signaled that growth is set to slow after tight cost controls and upgraded collections helped it beat profit expectations for a third consecutive quarter. Samsung Electronics Co.’s chip unit beat expectations with a more than five-fold gain in profit, a healthy signal for an artificial intelligence spending wave that’s triggered a surge in memory demand. STMicroelectronics NV, a chip supplier for Tesla Inc. and Apple Inc., forecast first-quarter revenue that beat analysts’ estimates after demand from consumer electronics customers showed signs of recovery at the end of last year. Russia’s Lukoil PJSC agreed to sell most of its international assets to private equity giant Carlyle Group, three months after being hit by US sanctions. Canon Inc. said its 90-year-old Chairman Fujio Mitarai will step away from day-to-day leadership, the latest attempt by one of corporate Japan’s most influential leaders to pass control to a younger generation. Alibaba Group Holding Ltd.’s logistics arm is investing in robovan maker Zelos, a move that will help expand the Chinese e-commerce leader’s presence in the autonomous driving field. Hyundai Motor Co. reported its lowest quarterly profit in more than three years as South Korea’s largest automaker faced persistent pressure from US tariffs and the pullback of the electric vehicle transition in some markets. Some of the main moves in markets:

Stocks

The S&P 500 fell 1.1% as of 11:14 a.m. New York time The Nasdaq 100 fell 1.8% The Dow Jones Industrial Average fell 0.4% The Stoxx Europe 600 fell 0.1% The MSCI World Index fell 0.9% Bloomberg Magnificent 7 Total Return Index fell 1.7% The Russell 2000 Index fell 0.9% Microsoft fell 12% Currencies

The Bloomberg Dollar Spot Index was little changed The euro fell 0.2% to $1.1936 The British pound fell 0.2% to $1.3775 The Japanese yen rose 0.3% to 152.91 per dollar Cryptocurrencies

Bitcoin fell 5.2% to $84,633.39 Ether fell 6.7% to $2,813.72 Bonds

The yield on 10-year Treasuries was little changed at 4.24% Germany’s 10-year yield declined three basis points to 2.83% Britain’s 10-year yield declined four basis points to 4.51% The yield on 2-year Treasuries declined two basis points to 3.55% The yield on 30-year Treasuries advanced one basis point to 4.87% Commodities

West Texas Intermediate crude rose 3.5% to $65.42 a barrel Spot gold fell 2.7% to $5,271.86 an ounce ©2026 Bloomberg L.P.