Alphabet plunges 12%: doubts about the tech boom's sustainability hit global markets

Alphabet's slump and diverging markets

Global stock markets moved in different directions on Thursday, October 29, as investors weighed a fresh batch of corporate earnings amid growing doubts about the sustainability of the global technology boom. The biggest disappointment came from Alphabet, Google's parent company: profit fell short of expectations while large spending on artificial intelligence continued, and the company's shares dropped 12% in trading. This was reported by AFP.

America and Europe: different trajectories

The tech-heavy Nasdaq Composite was down 1.3% in midday trading in New York, while the Dow and the S&P 500 lost 0.3% each. IG analyst Chris Beauchamp noted a rare combination: the three main US indices are retreating, while small companies are rising along with a broad rally in Europe. Tech concerns, he said, have also spread to Caterpillar — the second-largest stock in the Dow — for which the boom in AI infrastructure spending raises the cost of servicing large debt.

European indices rose on oil majors

European markets, by contrast, closed higher: the FTSE 100 gained 0.3%, the CAC 40 rose 1.1%, and the DAX added 1.3%. London and Paris were supported by record profits from oil giants Shell and TotalEnergies, which benefited from disruptions to oil and gas supplies in the Middle East that lifted prices and refining margins. At the same time, oil prices themselves fell by more than one percent on reports of a resumption of US-Iran diplomatic efforts to prevent new strikes.

Rates, inflation and US data

The Federal Reserve, as expected, held rates on Wednesday, citing the need for additional data in the fight against inflation, which has stayed above the two percent target for a fifth year; two committee members voted for an immediate hike. The European Central Bank also left rates unchanged. According to AFP, core inflation as measured by the PCE index rose 3.1% year-on-year in September — the highest since May — and more than three quarters of investors, according to the CME FedWatch tool, expect a Fed rate hike in December. US GDP grew 3.4% at an annualized pace in the third quarter, beating expectations.

Asia and other tech results

Asian results were mostly negative: South Korea's Kospi closed down 1.2%, Hong Kong and Shanghai fell, while Tokyo finished trading up 1.1%. Doubts about the returns on AI spending were reinforced by Samsung Electronics: the world's largest memory chip maker posted record quarterly profit, but its semiconductor division fell short of market expectations. Against this backdrop, Microsoft reported revenue and profit above forecasts thanks to its Azure cloud division, and Oracle gave an encouraging revenue outlook; market attention now turns to the earnings reports of Amazon and Intel.