Alphabet lost about $500 billion of market value, Marvell fell 12% with no word on its reported deal talks, and Oracle gave back half its investor-day gain. KLA, Quanta and Vertiv rose, and the Russell 2000 gained while the Nasdaq fell about 1.6%.
The selloff in AI stocks on Thursday was large at the top and narrow underneath. It hit Alphabet and Amazon, two of the biggest spenders on AI, and the chipmakers that depend on the pace of that spending, though Meta rose and Microsoft slipped only about 1%. It skipped the companies that make chipmaking tools and build power grids.
Alphabet fell about 13% to about $282.60 in early afternoon, after reporting negative free cash flow and below-forecast capital spending on Wednesday evening. Bloomberg calculated that about $511 billion of market value had been erased by 9:35 a.m. Eastern. The Nasdaq Composite was down about 1.6% and the S&P 500 about 0.6%.
The rest of the market went the other way. The Russell 2000 rose about 0.8% and the equal-weighted S&P 500 about 0.8%. About 80% of stocks were higher an hour after the open, according to Mazzola of Schwab Network. Homebuilder and bank ETFs rose about 2% and 1%.
The losers
Marvell Technology fell about 12% to about $221.50, deepening its overnight slide after reports that it is in advanced talks to buy Lumentum. Neither company has commented. At that price Marvell has lost about $26 billion of market value since Wednesday's close, by our arithmetic. Lumentum rose about 2% to about $932.
Oracle, which rose more than 10% on Wednesday during its investor day, fell about 5% to about $137.30 from a $144.54 close, giving back roughly half that gain. Micron fell about 4.7%, AMD and Broadcom about 2% each, and the Philadelphia semiconductor index about 1.5%. Amazon, which reports after the close, fell about 3.4%.
The winners
KLA, which makes inspection and measurement tools for chip factories, rose about 6% to about $168.20. On Wednesday night it had guided fiscal second-quarter revenue about 5% above forecasts, and it was indicated up less than 2% before the open.
Quanta Services, which builds power lines and grid connections, rose about 5.6% after a quarter in which revenue rose 57% and its backlog reached a record. Vertiv, which makes power and cooling equipment for data centers, rose about 2.4%. Meta Platforms rose about 2.5%.
What separates them
The day's losers are the companies whose cash flows are most exposed to how fast hyperscalers spend: Alphabet and Amazon among the hyperscalers, and chip and cloud companies whose valuations assume that spending keeps accelerating. Alphabet's negative cash flow and Microsoft's capacity delays put that pace in question.
The winners sell the physical inputs that must be in place before any data center can run, such as chipmaking tools, grid capacity and power equipment. Their orders are already booked. That may explain why investors treated them differently, though no single report on Thursday settles it.
Not every industrial was spared. Caterpillar fell about 8.6% after keeping its full-year outlook unchanged.
Rotation or warning?
The rotation view: money is moving out of the most expensive AI stocks into cheaper and more cyclical shares, breadth was strong, and companies with booked orders are being rewarded.
The warning view: the companies at the top of the AI supply chain set the spending pace for everyone below them, and if hyperscalers slow or finance more of their spending with debt, today's winners face the same question later.
What to watch
Amazon's capital spending figures after the close, any Marvell or Lumentum statement, Lumentum's results in early November, Oracle's fiscal second-quarter results around Dec. 14, and whether the Russell 2000's outperformance holds into Friday.