Alphabet falls almost 8% after downbeat earnings, heavy AI spend

Indexes: Dow up 0.47%, S&P 500 up 0.19%, Nasdaq down 0.07%

(Updates as of mid afternoon)

By Abigail Summerville and Shashwat Chauhan

The S&P 500 and the Dow increased on Wednesday, as financiers started to brush off frustrating Alphabet profits and weighed the possibility of future interest rate cuts from the U.S. Federal Reserve.

Google-parent Alphabet dropped 7.3% after posting downbeat cloud profits development on Tuesday and allocating a higher-than-expected $75 billion financial investment for its AI buildout this year.

AI-related stocks showed signs of healing after being rocked last week following the soaring popularity of an inexpensive Chinese expert system design developed by start-up DeepSeek. Nvidia, which signed up one of the biggest losses, was up 3.3% on Wednesday.

"Ultimately, demand is not disappearing for AI even with the DeepSeek news. They ´ re all going to have to spend more money which ´ s what the AI story has been. This is a fairly long cycle story," said Rob Haworth, senior financial investment strategist at U.S. Bank Asset Management.

Advanced Micro Devices, meanwhile, lost 8.2% after CEO Lisa Su said the company's current-quarter data center sales - a proxy for its AI profits - would fall about 7% from the previous quarter.

On the data front, investors are looking ahead to the January nonfarm payrolls report, expected to be launched on Friday.

U.S. services sector activity all of a sudden slowed in January in the middle of cooling need, helping curb cost growth, a report from the Institute for Supply Management revealed on Wednesday.

"There are some issues that the Fed may need to ease faster, that the economy is slowing, but that ´ s really positive news for the marketplaces due to the fact that they ´ re looking for those Fed rate cuts," Haworth said.

The next Federal Open Markets Committee meeting remains in March, and while only 16.5% of traders anticipate a rate cut then, a majority of traders expect a cut in June, according to CME's FedWatch Tool.

Richmond Fed president Thomas Barkin said the Fed was still leaning towards more rate cuts this year, addsub.wiki however flagged uncertainty around the effect of brand-new tariffs, immigration, guidelines and other from U.S. President Donald Trump's administration.

At 2:00 p.m. ET (1900 GMT), the Dow Jones Industrial Average increased 207.53 points, or 0.47%, to 44,763.57, the S&P 500 gained 11.61 points, or 0.19%, to 6,049.49 and the Nasdaq Composite lost 12.91 points, or 0.07%, to 19,641.11.

Nine of the 11 S&P 500 sectors traded higher, with property and energy stocks leading the gains while interaction services fell over 3%.

Shares of Apple slipped 1.2% as Bloomberg News reported that China's antitrust regulator was getting ready for a possible investigation of the iPhone maker.

Fiserv advanced 7.3% as the payments firm beat quotes for fourth-quarter earnings, assisted by strong need in its banking and payments processing system.

Markets also await advancements on the tariffs front after Trump said on Tuesday he remained in no rush to speak with Chinese President Xi Jinping to try to pacify a brand-new trade war between the nations.

The Cboe Volatility Index, called Wall Street's fear gauge, dropped 6.3% to 16.1 today.

In business movers, FMC Corp plunged 32% after the agrichemicals producer forecast first-quarter revenue below price quotes.

Johnson Controls jumped 12.5% as the building solutions company called Joakim Weidemanis as chief executive officer and raised its 2025 profit projection.

Advancing problems outnumbered decliners by a 2.62-to-1 ratio on the New York Stock Exchange, and by a 1.88-to-1 ratio on the Nasdaq.

The S&P 500 published 31 brand-new 52-week highs and 12 brand-new lows while the Nasdaq Composite tape-recorded 100 brand-new highs and 85 brand-new lows.

(Reporting by Abigail Summerville in New York, Shashwat Chauhan and Sukriti Gupta in Bengaluru