Wall Street penalizes tech giants: AI is expensive, investors demand results

Alphabet, Amazon, Intel, and ServiceNow are under heavy pressure on Wall Street. Massive AI spending and growth prospects are raising concerns.

Nearly $500 billion in market value wiped out at Alphabet in a single session, a record-breaking sell-off in ServiceNow, and another round of punishment for Amazon and Intel after earnings. October 29, 2026, marked a sharp return of investor concerns over the profitability of artificial intelligence spending. The Nasdaq fell roughly 1.4%, while the S&P 500 declined 0.3%. Behind the market moves, a common demand is emerging: technology companies must now prove that their enormous AI investments can translate into sustainable growth and sufficient cash generation.

The correction, however, was far from universal across U.S. equities. According to the Associated Press market report, nearly four out of five S&P 500 stocks actually rose on Thursday. The major indexes' declines largely reflected the outsized influence of a handful of technology companies. Alphabet Plunges 12.6% Despite Google Cloud's Explosive Growth

The most dramatic sell-off hit Google's parent company. Following its third-quarter earnings release, Alphabet shares plunged 12.6%, erasing approximately $500 billion in market capitalization.

Revenue nevertheless reached $127.6 billion, up 25% year over year, while operating income increased 30%. But the results fell short of certain market expectations, particularly in advertising and search.

Google Search & other revenue grew 12%, down from 17% in the previous quarter. The slowdown comes as generative search features, including AI Overviews and AI Mode, gradually reshape how results are displayed and how users navigate the web.

Still, attributing the entire advertising slowdown to AI cannibalization would be premature. Alphabet maintains that its AI investments are increasing search activity, including commercial queries. The real question is whether the company can preserve its advertising economics as search continues to evolve.

Google Cloud presents a striking contrast. Revenue more than doubled to $30.7 billion, representing 103% annual growth. The business is benefiting from demand for AI infrastructure, cloud services, and Google's proprietary TPU processors.

Yet that momentum was not enough to reassure investors. Quarterly capital expenditures reached approximately $51.4 billion, while free cash flow turned negative at $9.1 billion. Alphabet also expects full-year capital spending of between $195 billion and $205 billion in 2026, with another increase anticipated in 2027.

Wall Street recognizes the cloud business's commercial strength, but increasingly questions how quickly those investments will generate returns. Amazon: AWS Accelerates While Free Cash Flow Deteriorates

Amazon's quarterly earnings release extended those concerns after Thursday's closing bell. The company reported $201.9 billion in revenue, up 12%, and net income of $20.7 billion, equivalent to $1.89 per diluted share.

AWS remains the primary growth engine. Cloud revenue increased 39.3% year over year to $46 billion, its fastest growth rate in nearly five years and an annualized revenue run rate of approximately $184 billion.

CEO Andy Jassy even expects AWS growth to exceed 40% in both 2027 and 2028, signaling confidence in long-term demand for AI infrastructure.

Financing that expansion, however, has become a sensitive issue. Over the trailing 12 months, Amazon reported positive operating cash flow of $168.3 billion, but free cash flow stood at negative $42.4 billion. The gap largely reflects a dramatic increase in equipment and infrastructure purchases, much of it directed toward artificial intelligence.

For the fourth quarter, Amazon forecast revenue between $240 billion and $247 billion. The midpoint sits slightly below the expectations cited by analysts.

After declining 4.25% during regular trading, the stock fell another approximately 7% in after-hours trading following the release, according to initial market quotes. These extended-hours moves should not be confused with official closing prices. Intel: A Strong Quarter Undermined by Weak Guidance

Intel illustrates another disconnect between reported earnings and investor expectations.

The semiconductor manufacturer posted quarterly revenue of approximately $16.5 billion, up 21% year over year. Adjusted earnings reached $0.52 per share, beating market estimates.

Its Data Center and AI division delivered remarkable 78% growth, reaching $7.3 billion. Meanwhile, Client Computing and Physical AI revenue, which includes personal computers, declined 5% to $8.1 billion.

The real problem was Intel's fourth-quarter outlook. The company expects revenue between $15 billion and $16 billion, an adjusted gross margin of approximately 38%, and adjusted earnings of $0.25 per share. Those projections fall below analyst estimates as the PC market continues to face supply constraints and uncertainty around demand.

After dropping roughly 3.6% during the regular session, Intel shares plunged more than 20% in after-hours trading. Investors appeared to place far greater weight on the company's year-end outlook than on its third-quarter growth. ServiceNow and Fortinet: Software Is Not Immune

The pressure extends beyond infrastructure providers. Enterprise software stocks also experienced aggressive selling as investors assessed how AI could reshape traditional business models.

ServiceNow lost nearly 27% during the session, recording its largest single-day decline. Yet its third-quarter earnings showed revenue of $4.1 billion, up 20.5%, alongside increases to certain full-year projections.

Concerns centered partly on the outlook for current remaining performance obligations, or cRPO, a measure of contracted revenue expected to be recognized over the following 12 months. Its projected growth fell short of elevated market expectations. Momentum in new AI products was not enough to dispel those concerns.

Fortinet experienced a similarly sharp decline despite growing revenue and improvements to several annual forecasts. Analysts pointed to slower service revenue growth and expectations that had