Alphabet slipped ahead of earnings but rebounded after announcing increased AI spending.
| Photo Credit:
Brendan McDermid
U.S. stocks ended lower on Wednesday,
with losses in Advanced Micro Devices, Palantir and other
technology companies, as investors worried about pricey
valuations and whether Wall Street’s AI rally has reached its
peak.
Alphabet fell almost 2% ahead of its quarterly results
after the bell. After the close, it regained 2% as the company
said it was aggressively ramping up spending as it deepens its
investments in the AI race.
Advanced Micro Devices tumbled 17% after the
chipmaker forecast quarterly revenue that disappointed investors
and suggested it is having a tough time competing against AI
heavyweight Nvidia.
Nvidia dropped 3.4% and the PHLX semiconductor index fell
4.4%.
Palantir slumped almost 12%, reversing sharp gains from
the previous day that were driven by the AI data company’s
strong quarterly sales.
“The size of the infrastructure buildout is unprecedented,
and the pace of consumers and businesses adopting AI tools is
also unprecedented. The stock market is having a really hard
knowing where to price the stocks and what the future looks
like. … The market is suddenly skeptical and concerned about
it,” said Jed Ellerbroek, a portfolio manager at Argent Capital
in St. Louis.
Some software companies added to recent losses amid worries that
rapidly advancing AI could disrupt industry incumbents.
Snowflake fell 4.6% and Datadog lost 3.3%.
“If you’ve got legacy software that’s old and clunky, you’re
a ripe target for AI. We’re a bit bearish on software in
general, with the whole impetus of AI,” said Josh Chastant,
portfolio manager, public investments at GuideStone Funds.
Investors selling AI-related stocks shifted into less
pricey companies that sat out the tech rally in recent years.
The S&P 500 value index gained for a fifth straight
session, while the S&P 500 growth index dropped.
The S&P 500 declined 0.51% to end the session at 6,882.72
points.
The Nasdaq fell 1.51% to 22,904.58 points, while the Dow Jones
Industrial Average rose 0.53% to 49,501.30 points.
Even as the S&P 500 lost ground, seven of the 11 S&P 500 sector
indexes rose, led by energy, up 2.25%, followed by a
1.8% gain in materials.
Volume on U.S. exchanges was heavy, with 24.6 billion shares
traded, compared to an average of 19.9 billion shares over the
previous 20 sessions.
Super Micro Computer’s shares jumped 13.8% after
the company raised its annual revenue forecast on sustained
demand for its AI-optimized servers as companies ramp up data
center capacity.
Limiting losses in the S&P 500, shares of the drugmaker Eli
Lilly rallied about 10% after the company forecast 2026
profit above Wall Street expectations.
The government’s closely watched jobs report for January has
been pushed back from its scheduled release on Friday due to a
four-day partial government shutdown that ended on Tuesday.
In the meantime, the ADP national employment report on
Wednesday showed that U.S. private payrolls increased less than
expected in January amid job losses in the professional and
business services, as well as manufacturing sectors.
Advancing issues outnumbered falling ones within the S&P
500 by a 2.6-to-one ratio.
The S&P 500 posted 93 new highs and 23 new lows; the
Nasdaq recorded 218 new highs and 318 new lows.
Published on February 5, 2026
