Alphabet falls almost 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 rose on Wednesday, as investors began 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 earnings development on Tuesday and allocating a higher-than-expected $75 billion financial investment for its AI buildout this year.

AI-related stocks revealed indications of healing after being rocked recently following the soaring appeal of an inexpensive Chinese expert system design developed by startup DeepSeek. Nvidia, which signed up among the biggest losses, was up 3.3% on Wednesday.

"Ultimately, need is not disappearing for AI even with the DeepSeek news. They ´ re all going to need to spend more money and that ´ s what the AI story has been. This is a fairly long cycle story," said Rob Haworth, senior 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 profits - would fall about 7% from the previous quarter.

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

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

"There are some concerns that the Fed may need to ease faster, that the economy is slowing, however that ´ s in fact 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 meeting remains in March, and while just 16.5% of traders anticipate a rate cut then, a majority of traders anticipate 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 new tariffs, immigration, 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 greater, with property and energy stocks leading the gains while tipped over 3%.

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

Fiserv advanced 7.3% as the payments company beat estimates for fourth-quarter revenue, assisted by strong demand 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 defuse a brand-new trade war in between the countries.

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

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

Johnson Controls jumped 12.5% as the structure services business named Joakim Weidemanis as primary executive officer and townshipmarket.co.za raised its 2025 profit projection.

Advancing problems surpassed 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 new highs and 85 brand-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 Nia Williams)