U.S. stock indexes hit multi-week lows on Thursday, as concerns over heavy AI spending resurfaced after the first batch of Big Tech earnings, while oil prices touched the $100-a-barrel mark following the widening Middle East conflict.

Second-quarter results from Alphabet and Tesla, the first of the so-called “Magnificent Seven” megacap companies to report this season, failed to impress investors.

Shares of Google’s parent fell 6.4% after the results did little to reassure investors as attention shifted to its higher spending plans.

“Alphabet is spending hundreds of billions of dollars as it looks to stay ahead in the AI arms race,” said AJ Bell investment director Russ Mould.

“But there is still a healthy degree of scepticism about the ability of these investments to generate a commensurate level of return.”

The stock’s fall dragged the communication services sector 4.4% lower, leading sector-wise losses on the benchmark S&P 500.

Tesla dropped 12.2% after reporting negative free cash flow for the second quarter for the first time in more than two years.

Capital spending plans will remain in focus when other major technology companies report next week, as investors question whether the huge sums being poured into AI are translating into meaningful returns, and if profit growth can justify elevated stock valuations.

Geopolitical concerns added to the pressure. After months of investor focus on the Strait of Hormuz, attention has shifted to the Red Sea, where Iranian-aligned Houthis, who control areas near the Bab el-Mandeb strait, have opened a new front in the Middle East crisis.

U.S. President Donald Trump said he would hold Iran accountable for any attacks by Yemen’s Houthi militants.

Brent crude futures briefly rose to $100 a barrel, their highest level since late May.[O/R]

Wall Street’s fear gauge, the CBOE Volatility Index, rose 2.15 points to 18.79 after three consecutive days of declines.

The surge in oil prices revived inflation worries, pushing interest-rate-sensitive 2-year Treasury yields to a 17-month high as traders increased bets on a Federal Reserve rate hike as early as next week. [US/]

Markets are now pricing in about a 38% chance of a 25-basis-point increase at the Fed’s July meeting, up from 12% a week ago, according to CME’s FedWatch tool.

The number of Americans seeking unemployment benefits for the first time fell sharply last week, leaving Fed officials to keep their focus on containing inflation.

At 9:54 a.m. ET, the Dow Jones Industrial Average fell 504.86 points, or 0.97%, to 51,713.72, the S&P 500 lost 70.92 points, or 0.95%, to 7,428.04 and the Nasdaq Composite lost 433.12 points, or 1.69%, to 25,257.79.

Chip stocks, which have recently hit a volatile patch, were mixed. Texas Instruments fell 3.2% despite forecasting quarterly revenue above estimates.

Defense giant Lockheed Martin rose 11.1% after lifting 2026 sales and profit forecasts.

ServiceNow gained 2% after the enterprise software company raised its annual subscription revenue forecast for the second time.

Declining issues outnumbered advancers by a 2.72-to-1 ratio on the NYSE and by a 2.2-to-1 ratio on the Nasdaq.

The S&P 500 posted 15 new 52-week highs and eight new lows, while the Nasdaq Composite recorded 30 new highs and 68 new lows.

(Reporting by Ragini Mathur and Avinash P in Bengaluru, additional reporting by Purvi Agarwal; Editing by Amanda Cooper, Shinjini Ganguli and Maju Samuel)