AI spending stock market jitters hit Alphabet as yields and oil jump
Alphabet’s bigger AI budget rattled stocks as oil topped $100 and Treasury yields rose, putting Big Tech borrowing costs in focus.
By Sal Moretti · Money Reporter
3 min read
AI spending stock market nerves flared Thursday after Alphabet said it could spend as much as $205 billion this year, a bigger capital plan that landed just as oil prices and Treasury yields were climbing.
Shares of Google parent Alphabet fell more than 6% Thursday, according to FactSet data cited by MarketWatch. The drop helped pull pressure onto other hyperscalers, with Microsoft down 2.28% and Meta off 3.37%.
The broader market was sliding, too. FactSet data showed the S&P 500 down 1.24%, the Nasdaq composite lower by 2.17%, and the Dow Jones Industrial Average off 0.96% during Thursday trading.
Why is AI spending worrying the stock market?
Investors are questioning whether the enormous sums being poured into data centers, chips and power infrastructure will turn into enough revenue to justify the bills. Higher borrowing costs make that question sharper because companies have to pay more to fund long-term projects.
Anthony Saglimbene, chief market strategist at Ameriprise Financial, told MarketWatch that investors still do not have a clear view of how much revenue AI capital spending is producing. He said the concern is that companies may not get the payoff they expect.
Alphabet did not immediately respond to MarketWatch’s request for comment.
Oil and yields add another headache
The market stress was not coming from tech alone. MarketWatch reported that global oil prices moved above $100 a barrel as investors braced for more escalation in the U.S.-Iran conflict, which is nearing its sixth month.
The oil move raised fresh inflation worries at a time when the Federal Reserve, led by new Chair Kevin Warsh, has renewed its push to bring inflation back to its 2% target, according to MarketWatch.
Treasury yields also jumped. The 2-year Treasury yield rose to 4.36% Thursday, its highest intraday level since February 2025, while the 10-year yield reached a new 2026 intraday high of 4.7%, FactSet data showed.
Higher yields matter for the AI trade because several major technology companies are using more borrowed money and some stock issuance to help fund the build-out, according to MarketWatch. Goldman Sachs recently estimated that global AI-related issuance of corporate bonds and leveraged loans was already approaching $500 billion this year.
Jack Janasiewicz, lead portfolio strategist at Natixis Investment Managers Solutions, told MarketWatch that the hyperscalers still look creditworthy from a balance-sheet standpoint. He said bond buyers have appeared comfortable with recent yields, though investors are now weighing whether cheaper Chinese AI models could challenge the expensive frontier-model push.
Dip buyers face a test
Big Tech’s AI leaders have bounced back repeatedly this year, with semiconductor and memory-chip shares recovering earlier in the week from a June selloff, according to MarketWatch. The Magnificent Seven group also had rebounded from weakness in the first half of 2026.
Steve Sosnik, chief strategist at Interactive Brokers, told MarketWatch that oil and bond markets had already been flashing concern. He said falling prices may now test how willing dip buyers are to step back in.
For now, the market’s message is blunt: investors still like the AI story, but they want proof that the spending spree can earn its keep while money gets more expensive.
This story draws on original reporting from MarketWatch.