Wall Street tumbles as Big Tech AI spending rattles investors

Core Viewpoint - Wall Street experienced a significant decline, primarily driven by losses in major tech companies like Microsoft and Amazon, as Alphabet announced plans to double its capital spending on AI, potentially reaching $185 billion by 2026, contributing to a collective expenditure of over $500 billion on AI by Big Tech this year [1][4]. Group 1: Company Performance - Microsoft shares fell by 5%, while Palantir and Oracle saw declines of 6.8% and 7%, respectively [2]. - Amazon's stock dropped 4.4% during regular trading and fell an additional 10% after hours, reflecting concerns over substantial capital expenditures in AI [4]. - Nvidia, a chipmaker expected to benefit from increased AI spending, saw a decline of 1.4% [4]. - Qualcomm's shares slid 8.5% after forecasting second-quarter revenue and profit below estimates [9]. - Estee Lauder shares fell 19% as the company forecasted annual results below estimates [12]. Group 2: Market Trends - Investors have become increasingly cautious about heavy AI spending, seeking evidence that such investments are translating into revenue and profit growth [5]. - The S&P 500 software and services index fell 4.6%, marking a seventh consecutive session of losses, with notable declines in ServiceNow (down 7.6%) and Salesforce (down almost 5%) [8]. - The S&P 500 declined 1.23% to close at 6,798.40 points, with the Nasdaq down 1.59% to 22,540.59 points, and the Dow Jones Industrial Average down 1.20% to 48,908.72 points [11]. - The S&P 500 value index dipped 0.9% but remained positive for the week, while the growth index fell over 4% for the week [10]. Group 3: Investor Sentiment - The volatility in large-cap tech companies reflects uncertainty about whether significant capital expenditures will yield positive results [7]. - The CBOE volatility index, a measure of market fear, briefly reached its highest level in over two months [9]. - A shift in market focus has been observed, with traders reducing exposure to high-priced AI stocks and moving towards relatively cheaper stocks [10].