The stock market tumbled on Thursday as disappointing earnings from two “Magnificent Seven” heavyweights, Alphabet and Tesla, reignited concerns about heavy artificial intelligence spending and its return on investment. The Nasdaq Composite fell 2.1%, marking its worst day in weeks, while the S&P 500 dropped 1.1% and the Dow Jones Industrial Average declined 0.9%, according to Yahoo Finance.
Alphabet reported strong quarterly fundamentals but shocked investors by raising its full-year 2026 capital expenditure guidance to between $195 billion and $205 billion, up from a previous range of $180 billion to $190 billion, per CNBC. The company’s stock fell approximately 7.5% after-hours on the news, as traders reassessed the long-term profitability of the company’s massive AI infrastructure buildout.
Tesla, the other Mag 7 firm to report results, fell roughly 12% after-hours on Wednesday evening, having missed earnings expectations. CEO Elon Musk signaled that 2026 would be a “massive capex year” for the company, highlighting plans to expand spending on Optimus robots, robotaxis, and data centers, according to Yahoo Finance’s earnings coverage.
The selloff reflected a broader market anxiety about whether tech giants’ enormous AI spending commitments would eventually justify their current valuations. Both companies reported strong revenue growth and cloud business expansion, yet investors focused on the escalating capital commitments rather than the earnings beats. Alphabet had delivered cloud revenue growth of 82%, yet the capex guidance raised questions about near-term profitability.
Oil prices added pressure to the broader market, with Brent crude crossing the $100 per barrel threshold for the first time in weeks as Iran-backed Houthis escalated attacks on tankers in the Red Sea. West Texas Intermediate futures also surged on the geopolitical tensions. Rising oil prices reignited inflation concerns, pushing the 10-year Treasury yield to its highest level in a year and a half and complicating expectations for Federal Reserve rate cuts.
On the positive side, initial jobless claims unexpectedly dropped to 187,000 for the week ending July 18, marking the lowest level since 1969, according to Yahoo Finance. The data suggested labor market resilience despite the stock market downturn, though it also raised questions about whether the Federal Reserve would maintain its accommodative stance longer than expected.
The dual shock of disappointing mega-cap earnings guidance and surging oil prices sent the Nasdaq briefly below 25,000 for the first time since May, underscoring how concentrated the market’s recent gains have been in a handful of AI-focused technology stocks. Investors now face a recalibration: whether the artificial intelligence boom justifies the capital intensity required to build it out.
Sources
- Yahoo Finance — market close data for July 23, 2026, showing Nasdaq down 2.1%, S&P 500 down 1.1%, Dow down 0.9%; Tesla down 12% after-hours; Alphabet down 7.5% after-hours; oil prices and jobless claims data
- CNBC — Alphabet’s capex guidance raise to $195-205 billion from $180-190 billion, reported on July 22 earnings call
- Barron’s — July 22 market close data (S&P 500 down 0.14%, Nasdaq down 0.57%, Dow down 0.01%), Tesla earnings miss, Alphabet capex surprise, and semiconductor ETF performance
- Reuters — broader context on AI spending concerns and tech earnings impact on July 23
