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Why Are Tech Stocks Falling Today? Alphabet's Earnings Miss Revives the AI Spending Scare (Oct. 29, 2026)

What happened on October 29

If you only looked at the headlines today, it seemed like stocks were in free fall. They weren't. This was a tech and AI selloff driven by earnings, not a broad market crash. It looks bad because the names falling hardest are some of the biggest companies in the world.

Here's how the main indexes closed on Thursday, October 29, 2026:

The gap tells the story. The Nasdaq, which is packed with large tech stocks, fell more than four times as much as the S&P 500. Small companies, which have little to do with the AI trade, actually went up.

The trigger: Alphabet's earnings miss

Google's parent company reported third-quarter results after the close on October 28, and they missed on almost every line investors cared about:

• Earnings per share of $2.12, against a consensus of $3.01. That's roughly 30% below what analysts expected.
• Search and YouTube ad revenue both missed estimates.
• Free cash flow was negative, by more than $9 billion.
• Alphabet said capital spending will rise again next year.

The detail that rattled investors most: Alphabet said the Search shortfall came as more queries moved to "AI mode." That fed a fear that has hung over Google for two years, that AI could eat into the search ads that pay for everything else.

The stock fell more than 12% and turned negative for 2026. We previewed what to watch in these results in Microsoft and Alphabet report: the $50 billion-a-quarter AI spending test.

Why it spread: the AI spending question is back

One company missing would usually stay one company's problem. This one spread because it hit the market's biggest open question: can Big Tech pay for its AI build-out?

Investors are now trying to sort companies into two groups:

1. Companies that can fund their AI plans out of the cash they earn.
2. Companies that are burning cash and borrowing to get there.

Alphabet's negative free cash flow pushed it toward the second group in investors' minds, at least for a quarter. Microsoft showed the same tension. It beat forecasts and rose early in the day, but gave up those gains and closed lower after announcing plans to sell at least $25 billion of bonds to fund capital spending.

When the world's most profitable companies need to borrow for AI, investors start asking harder questions about everyone else in the chain. Our explainer on who actually gets paid from AI capex maps out that chain.

The other big losers

Software, cybersecurity, AI chips and even an industrial name like Caterpillar all fell hard. That's a sign of how far the selling reached beyond the companies most people think of as "tech."

Interest rates are adding pressure

The selloff didn't happen in a vacuum. On October 28, the Federal Reserve held rates at 3.75%–4.00%, but it is widely expected to raise them in December. Two policymakers wanted a 25 basis point hike immediately. See our coverage: the Fed holds, with a December hike in view.

Higher rates hit expensive growth stocks hardest. Their prices depend on profits expected many years from now, and those future profits are worth less when you can earn more on safe bonds today. Higher rates also make debt-funded data centres more expensive to build.

Tech has been shaky all month

Today wasn't the first wobble. The Nasdaq fell 2.60% on October 22, and AI stocks have swung hard on debt and valuation worries throughout October. We looked at the bigger picture, including the warning signs and the reasons the boom has held up so far, in Will the AI bubble burst in the US stock market?

What to watch next

Apple and Amazon report earnings tomorrow, October 30. They'll help show whether today's AI-spending worry spreads or fades:

• Amazon is one of the biggest AI spenders through AWS. Investors will look closely at its capital spending plans and cash flow, the same numbers that hurt Alphabet.
• Apple spends far less on AI infrastructure. A solid report could show investors are still happy to own Big Tech that isn't pouring cash into data centres.

What this means for regular investors

If you own an S&P 500 or Nasdaq index fund, you felt some of today's drop, because Alphabet, Microsoft and other AI-linked stocks are among the largest holdings. Our 15-minute AI exposure check shows how to measure how much AI you already own, and S&P 500 concentration risk explains why a few stocks can move the whole index.

This is just the news, not advice on what to do with any holdings. One bad day for tech, even a sharp one, doesn't tell you where markets go next.

The bottom line

Alphabet's miss, and especially its negative free cash flow, reopened the market's biggest worry: whether Big Tech's AI spending will pay off before the bills come due. That hit the largest tech and AI names hard. But the broader market held up far better than the headlines suggest, and small caps rose. Tomorrow's Apple and Amazon results will show whether this stays a tech story or becomes something bigger.

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