Alphabet falls nearly 8% after downbeat revenues, heavy AI invest

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 investors started to brush off disappointing Alphabet profits and weighed the possibility of future interest rate cuts from the U.S. Federal Reserve.

Google-parent Alphabet dropped 7.3% after publishing downbeat cloud income growth on Tuesday and earmarking a higher-than-expected $75 billion investment for its AI buildout this year.

showed signs of healing after being rocked last week following the soaring appeal of a low-priced 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, need is not going away for AI even with the DeepSeek news. They ´ re all going to need to invest more cash which ´ s what the AI story has actually been. This is a fairly long cycle story," said Rob Haworth, senior financial investment strategist at U.S. Bank Asset Management.

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

On the data front, financiers are looking ahead to the January nonfarm payrolls report, anticipated to be released on Friday.

U.S. services sector activity suddenly slowed in January amid cooling need, helping curb rate growth, a report from the Institute for Supply Management revealed on Wednesday.

"There are some concerns that the Fed might need to ease quicker, that the economy is slowing, but that ´ s really favorable news for the marketplaces due to the fact that they ´ re searching for those Fed rate cuts," Haworth said.

The next Federal Open Markets Committee conference remains in March, and while just 16.5% of traders expect 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, however flagged uncertainty around the impact of brand-new tariffs, migration, guidelines and other initiatives 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 real estate and energy stocks leading the gains while communication services tipped over 3%.

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

Fiserv advanced 7.3% as the payments company beat quotes for fourth-quarter revenue, helped by strong demand in its banking and payments processing system.

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

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

In corporate movers, FMC Corp plunged 32% after the agrichemicals manufacturer projection first-quarter income below estimates.

Johnson Controls leapt 12.5% as the structure options business named Joakim Weidemanis as president and raised its 2025 earnings forecast.

Advancing issues 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 posted 31 brand-new 52-week highs and 12 brand-new lows while the Nasdaq Composite taped 100 brand-new highs and 85 new lows.

(Reporting by Abigail Summerville in New York City, Shashwat Chauhan and Sukriti Gupta in Bengaluru; Editing by Pooja Desai, Devika Syamnath, Maju Samuel and ai-db.science Nia Williams)