Alphabet stock plunges 11.8% on weak earnings, dragging Wall Street down

Shares of Alphabet fell 11.8% in late-morning trading on Thursday, heading for the largest single-day drop in the company's history. The slide weighed heavily on U.S. markets after the tech giant reported summer growth that did not meet analyst forecasts.

At 11:15 a.m. Eastern time, the S&P 500 had slipped 0.3% and was on pace for its first loss in four days. The Nasdaq composite dropped 1.2%, while the Dow Jones Industrial Average gave up 0.2%, or 104 points. Most other stocks in the S&P 500 were rising, meaning the index would have closed higher without Alphabet's decline.

Alphabet disclosed late Wednesday that it burned through more cash in the final quarter as purchases of property and equipment exceeded $51 billion. Investors questioned whether such massive artificial intelligence spending would generate sufficient returns.

The drop reflects wider concerns in the industry. Companies are rushing to build data centers and buy AI chips, but borrowing costs for these projects have risen. Investors worry the technology may not deliver the expected productivity gains.

Other firms reported stronger summer profits than expected, offsetting some of the market's losses. KLA rose 6.7%, Eli Lilly gained 6.4%, Mastercard added 4.7%, and Merck rose 5.1%. DoorDash climbed 6.6% after announcing a $17 billion deal to buy Instacart and beating revenue forecasts. Norwegian Cruise Line Holdings jumped 14.1% as passengers spent more than anticipated.

In the bond market, the 10-year Treasury yield fell to 4.98% from 5.05% late Wednesday. The yield had retreated from its high of 5.30% earlier this month, the highest level since 2002. A 2% drop in Brent crude to $109.42 per barrel also contributed to lower yields.

European indexes rose after the European Central Bank held interest rates steady. President Christine Lagarde announced she will resign in February, nine months before her term ends. Asian markets were mixed, with South Korea's Kospi falling 1.2% as Samsung Electronics dropped 4.1% despite a profit jump.