Nasdaq Plunges 471 Points as Alphabet, Caterpillar Earnings Trigger Broad AI Spending Fears

Mumbai, 29 October 2026: The Nasdaq Composite tumbled 471.05 points, or 1.77%, to 26,078.80 at the opening bell on Thursday, as disappointing quarterly results from two Dow components – Alphabet and Caterpillar – reignited concerns over the profitability of massive artificial intelligence investments and the pace of industrial demand.

The tech-heavy index’s decline was accompanied by a 0.53% drop in the S&P 500 to 7,703.28 and a 0.41% fall in the Dow Jones Industrial Average to 52,258.57, while the Russell 2000 bucked the trend with a 0.41% gain to 2,830.51.

The sell-off, which put the S&P 500 on track to snap a three-day winning streak, unfolded as investors digested a mixed batch of corporate earnings, stronger-than-expected economic growth data, and persistent inflation figures that complicate the Federal Reserve’s policy path.

Alphabet’s $500 Billion Market Value Wipeout Reshapes AI Trade Narrative

Alphabet shares plunged approximately 13% in early trading, putting the Google parent on course to lose nearly $500 billion in market value – the second-largest one-day loss ever for a US-listed company and its steepest single-session decline since its 2004 initial public offering.

The sell-off was triggered by third-quarter results that missed Wall Street’s adjusted earnings per share and revenue expectations, with the company reporting negative free cash flow of $9.07 billion as artificial intelligence-related spending accelerated. Revenue came in at approximately $127.58 billion, falling short of analyst estimates of $128.20 billion, while earnings of $2.12 per share compared unfavourably with the $3.02 per share consensus.

The company maintained its full-year capital expenditures forecast at $195 billion to $205 billion, a figure that underscored the scale of its AI infrastructure build-out but did little to assuage fears that such spending is not translating into near-term profitability. Alphabet’s cloud business recorded growth of 103%, but a sharp slowdown in core search advertising growth and the cash burn overshadowed that metric.

The decline in Alphabet alone accounted for most of the over $660 billion in market value that the Nasdaq-100 was on track to erase if losses held.

Microsoft’s Steady Hand Provides Stark Contrast to Alphabet’s AI Spending Woes

In stark contrast to Alphabet’s rout, Microsoft shares added 1.73% to $MSFT after the software giant reported fiscal first-quarter results that beat analysts’ expectations on both revenue and earnings.

Microsoft earned an adjusted $4.89 per share on sales of $92.3 billion, surpassing FactSet estimates of $4.71 per share on $90.62 billion. The company’s Azure cloud infrastructure business grew 48%, a performance that helped offset concerns about the cost of its own AI investments.

The divergence between the two tech giants highlighted a shift in market sentiment: investors are no longer rewarding companies simply for investing heavily in AI but are increasingly demanding evidence that such spending is generating sustainable profits and has defined limits. Microsoft’s results provided both, easing some worry about the cost of its growth trajectory.

The stock pared gains following media reports that the company is planning to raise at least $25 billion through its first US investment-grade bond sale in more than nine years, a move that nonetheless underscored its ability to finance expansion without straining cash reserves.

Also Read: What Is the New York Stock Exchange (NYSE)?

Caterpillar’s 9% Slide Deepens Industrial Sector Gloom as Construction Sales Miss

Caterpillar shares slumped 9.39% to $649.28 despite the industrial giant reporting third-quarter earnings and revenue that beat Street expectations. The company earned an adjusted $7.20 per share on revenue of $20.68 billion, compared with analyst forecasts of $7.08 per share on $20.55 billion.

However, sales for its construction industries business came in slightly below estimates, and the company kept its annual sales forecast unchanged, raising questions over how long the data-centre boom can drive growth for power-generation equipment. The decline in Caterpillar, a Dow component, weighed heavily on the blue-chip index and contributed to the broader industrial sector’s underperformance.

The results came as investors assessed whether the surge in AI-related infrastructure spending would be sufficient to offset softening demand in traditional construction markets, a concern that has grown as borrowing costs remain elevated. The stock’s slide was the sharpest among Dow constituents, eclipsing the 6.65% decline in Salesforce and the 13.58% drop in Alphabet within the index.

Nasdaq 100 Heatmap Reveals Technology and Communication Services Carnage

The Nasdaq 100 heatmap painted a picture of broad-based selling across the technology and communication services sectors, with only a handful of stocks bucking the downward trend. Fortinet plunged 22.91% to $133.32 after the cybersecurity company reported third-quarter results that triggered a sharp sell-the-news reaction, despite beating headline consensus estimates. ServiceNow plummeted 24.76% to $114.40 after delivering mixed third-quarter results and issuing weaker-than-expected fourth-quarter guidance.

Marvell Technology sank 12.34%, adding to the pressure on technology stocks as investors reassessed growth prospects and AI-related spending. Meanwhile, Amazon (AMZN) remained in focus ahead of its earnings report, due after the closing bell, with investors closely watching its artificial intelligence spending plans and cloud computing outlook.

Among the few gainers, Apple rose 1.73%, Meta Platforms added 0.81%, and Costco gained 0.77%. Healthcare stocks also showed resilience, with Amgen advancing 3.44% and AstraZeneca climbing 3.18%.

Software and Semiconductor Sell-Off Accelerates as AI Trade Fractures

The technology sell-off was not confined to the mega-cap names. The iShares Semiconductor ETF fell more than 2%, with Nvidia down 1.09%, AMD off 1.47%, Micron Technology sliding 3.08%, and Intel dropping 3.40% in morning trading.

The Roundhill Memory ETF dropped more than 3% after jumping 7% on Wednesday, reflecting the volatility that has gripped AI-tied stocks throughout October. Software stocks also came under heavy pressure, with Salesforce down 6.65%, CrowdStrike off 3.60%, Palo Alto Networks falling 4.45%, and Datadog declining 2.84%. The broader software-related exchange-traded fund tracking the sector tumbled, with double-digit losses for Fortinet and ServiceNow following their earnings reports.

The declines came as investors questioned whether the debt-fuelled spending that has driven the AI trade will be harder to justify as borrowing costs climb, a concern that has tempered enthusiasm for the sector for most of the month. Arm Holdings fell 3.71%, Applied Materials slipped 0.83%, and Lam Research dipped 0.39%, while KLA Corporation was a rare bright spot, gaining 4.13%.

Also Read: How to invest in US stocks

US GDP Growth Beats Estimates at 3.4% as Inflation Accelerates to 3.6%

The market turmoil unfolded against a backdrop of economic data that painted a picture of resilient growth paired with stubborn inflation. The US economy grew at an annualised rate of 3.4% in the third quarter, topping a Dow Jones consensus estimate of 3.1% and accelerating from the 2.2% gain in the second quarter.

The better-than-expected expansion came as the personal consumption expenditures price index – the Federal Reserve’s preferred measure of inflation – rose 0.5% in September, putting annual inflation at a 3.6% clip. The core PCE price index, which excludes volatile food and energy costs, increased 0.3% month-over-month with an annual increase of 3.1%, matching estimates.

The combination of strong growth and persistent inflation reinforced expectations that the Fed’s decision to hold rates steady on Wednesday was a skip rather than a pause in its tightening cycle, with traders now seeing an 84% likelihood that the central bank will raise rates at least a quarter-percentage point at its December meeting.

Fed’s Rate Hold at 3.75%-4% Sets Stage for December Policy Decision

The Federal Reserve’s decision on Wednesday to hold its benchmark interest rate steady in a range between 3.75% and 4% was widely expected, coming after a quarter-percentage-point hike in September.

Policymakers acknowledged that inflation “remains elevated” but said they were awaiting the “accumulation of more information” before taking further steps. The decision had two dissenters who favoured a rate hike amid sticky inflation, a detail that underscored the central bank’s delicate balance between combating price pressures and supporting economic growth.

The personal consumption expenditures price index reading on Thursday, which showed the pace of price increases accelerated in September, added weight to the case for further tightening.

The Fed’s decision, which some market participants interpreted as mildly dovish at the margin, was better viewed as an expression of patience rather than a shift away from a tightening bias, with the door remaining open to further action should incoming data validate the need. The 10-year Treasury yield declined to 4.97%, while the US dollar index was up slightly at 102.31.

DoorDash’s $17 Billion Instacart Acquisition Reshapes Delivery Landscape

In corporate deal news, DoorDash announced plans to acquire hyper-local grocery delivery provider Instacart in a deal valued at $17 billion. DoorDash will pay $65 per Instacart share, a 26% premium over the stock’s October 22 closing price, with the transaction including 75% cash and Instacart stockholders able to elect cash, DoorDash stock, or a combination of both. Instacart’s board of directors unanimously approved the deal.

DoorDash shares popped over 5% in premarket trading before settling to a 2.34% decline in the opening session, while Instacart stock edged lower. DoorDash also reported a revenue and EBITDA beat for its third quarter. The acquisition, which doubles down on hyper-local delivery, comes as the company seeks to expand beyond its restaurant food delivery roots and capture a larger share of the grocery market. DoorDash’s move was announced alongside a broader set of earnings-driven stock moves that included Eli Lilly’s 8.34% surge on strong Zepbound and Mounjaro sales and Norwegian Cruise Line’s 12.01% jump following its beat on the top and bottom lines.

Also Read: US Stock Market Timings 

Eli Lilly Surges 8.34% on $7.48 Per Share Earnings Beat as GLP-1 Demand Persists

Eli Lilly shares jumped 8.34% to $1,396.75 after the pharmaceutical giant reported third-quarter adjusted earnings of $7.48 per share on revenue of $24.4 billion, handily beating analyst estimates of $6.26 per share on $22.61 billion in sales.

The results were driven by strong demand for the company’s weight-loss drug Zepbound and diabetes treatment Mounjaro, which have fuelled several strong quarters despite lower realised prices for its medications in the US following a drug-pricing deal struck with the Trump administration last year. Lilly also pointed to expanded US coverage for obesity care, including Medicare coverage of GLP-1 drugs for weight loss through a temporary pilot programme that began in July.

The company now expects 2026 revenue of $91 billion to $92 billion, up from its previous forecast of $85 billion to $87 billion, though it lowered its full-year adjusted earnings forecast to $35 to $36 per share from $35.50 to $36.50, reflecting $4.57 per share in charges related to acquired research and development from recent deals. Sales of its new GLP-1 obesity pill Foundayo fell short of Wall Street’s expectations.

Oil Prices Retreat 2.2% as Diplomatic Efforts on Iran Resurface

West Texas Intermediate crude futures declined 2.2% to $100.47 a barrel, while Brent crude futures, the international benchmark, slipped 1.9% to $109.56, after reports that US Vice President JD Vance had sent a letter to Mohsen Rezaei, secretary of Iran’s Supreme National Security Council and a former commander of the Islamic Revolutionary Guard Corps, in an effort to revive peace negotiations.

The diplomatic overture came as President Donald Trump played down the prospect of peace talks, telling reporters that Iran needed help with medical supplies and other items. The oil price retreat followed a nearly 3% rise in the previous session and reflected traders’ assessment of the potential for a diplomatic breakthrough that could avert a restart of US military strikes on Iran.

Iranian Foreign Minister Abbas Araghchi wrote on social media that “Iran continues to give diplomacy a chance to succeed.” The decline in crude prices weighed on energy stocks, with the sector among the few that posted gains in the S&P 500, while gold futures slipped 0.4% to $4,035 an ounce and silver traded down 2.1% to $52.535.

Healthcare and Defensive Sectors Shine as Investors Rotate Away from Technology

Amid the technology-led sell-off on 29 October 2026, healthcare emerged as the strongest-performing sector in the S&P 500, gaining 2.7% as investors rotated into defensive names. Eli Lilly led the advance with an 8.65% surge, while Merck gained 5.37%, Amgen added 3.37%, Vertex Pharmaceuticals rose 2.69%, Gilead Sciences climbed 2.68%, and Johnson & Johnson advanced 2.29%.

AbbVie rose 1.97%, Pfizer gained 1.49%, Abbott Laboratories added 1.77%, Bristol Myers Squibb rose 0.68%, and UnitedHealth edged up 0.30%, while Thermo Fisher slipped 0.32%. The consumer defensive sector also posted gains, with Walmart up 1.09%, Procter & Gamble rising 1.03%, Coca-Cola adding 0.72%, Costco gaining 0.46%, and Altria Group surging 3.92%. McDonald’s rose 1.94%, Home Depot gained 2.36%, Starbucks added 2.19%, TJX rose 1.18%, and Booking Holdings edged up 0.15%. Financials were mixed but largely positive, with Mastercard up 4.16%, Visa gaining 1.99%, JPMorgan Chase rising 1.39%, Bank of America adding 1.74%, Goldman Sachs up 0.83%, American Express rising 1.77%, Wells Fargo gaining 1.67%, Citigroup climbing 1.26%, and BlackRock advancing 1.54%.

The rotation into defensive and value-oriented sectors underscored the market’s unease with the technology sector’s AI-driven valuations and the uncertain path of monetary policy. The moves came as the Nasdaq Composite fell 1.77% to 26,078.80, the S&P 500 slipped 0.53% to 7,703.28, and the Dow Jones Industrial Average lost 0.41% to 52,258.57, while the Russell 2000 gained 0.41% to 2,830.51.

Healthcare’s 2.7% gain and consumer defensive advances contrasted sharply with communication services’ 6.8% decline and technology’s weakness, reflecting a session in which earnings disappointments from Alphabet and Caterpillar drove investors toward sectors with more stable cash flows and less exposure to AI capital spending debates. Among industrials, GE rose 1.42%, RTX gained 1.85%, Lockheed Martin added 1.98%, and Union Pacific advanced 1.46%, while Eaton slipped 0.43%. Overall, the sector moves were broad.

The opening session on 29 October 2026 was defined by a sharp divergence in corporate earnings outcomes, with Alphabet’s $9.07 billion negative free cash flow and revenue miss triggering a 13% share decline and a $500 billion market value loss, while Microsoft’s Azure-driven beat provided a counterpoint. Caterpillar’s 9.39% slide on construction sales weakness added to industrial sector concerns. The data releases – 3.4% GDP growth and 3.6% annual PCE inflation – suggest the Federal Reserve’s December meeting will be pivotal, with traders pricing an 84% probability of a rate hike. Oil’s 2.2% retreat on Iran diplomacy and the $17 billion DoorDash-Instacart deal added further layers to a complex market narrative.