Wall Street posted its worst single-day loss in a month on Thursday, as sharp drops in Tesla and Alphabet dragged the S&P 500 down 1.2 percent and revived investor concerns over the mounting cost of the artificial-intelligence buildout.

The one-day rout wiped roughly $500 billion off the combined market values of Alphabet and Tesla and turned Wednesday's earnings reports — nominally revenue beats for both companies — into a test of investor patience with rising AI capital-expenditure budgets that show no ceiling.

The Dow Jones Industrial Average fell 506 points, or 1 percent, and the Nasdaq composite sank 2.2 percent. Tesla closed 14.5 percent lower, its worst day since March 2025, and Alphabet fell 7.1 percent. Amazon shed 4.6 percent, losing about $120 billion in market value in sympathy with the two tech giants. Oil compounded the pressure: Brent crude jumped 7 percent to settle at $100.69 after attacks on two Saudi tankers in the Red Sea, sending American Airlines down 8.4 percent and Southwest 6.2 percent despite both carriers beating quarterly profit estimates.

Alphabet on Wednesday raised its 2026 capital-expenditure forecast to as much as $205 billion, a $15 billion increase from three months ago, and disclosed its first negative free cash flow, at negative $5.9 billion, since going public in 2004. Tesla said it expects to spend more than $25 billion on capex this year, more than double its 2025 outlay, and reported a $1.1 billion free-cash-flow shortfall of its own.

What sold off

Revenue was not the problem. Alphabet posted $119.8 billion in quarterly revenue, up 23 percent from a year earlier, and its cloud unit grew 82 percent to $24.8 billion. Tesla's automotive business brought in $20.52 billion, a 23 percent gain. Cash going out was what investors focused on.

"There is still a healthy degree of scepticism about the ability of these investments to generate a commensurate level of return," Russ Mould, investment director at AJ Bell, said.

Ben Barringer, head of technology research at Quilter Cheviot, told CNBC investors were fixed on "the sharp rise in capital expenditure, alongside a weaker margin outlook," and on "continued delays to Gemini 3.5 Pro and a lack of standout product releases."

The bull rebuttal

Company executives urged patience. On Wednesday's call, Elon Musk called 2026 "a massive capex year" and told analysts he was "confident that all the things that we're investing in will yield incredible returns. Really, maybe the best capex returns that we've ever seen." Alison Porter, portfolio manager at Janus Henderson, told CNBC that Alphabet had just posted "one of the strongest revenue growth quarters" it had in five years, and noted that Google Cloud's operating margin rose to 35.6 percent in the second quarter from 20.7 percent a year earlier — evidence, she said, that AI outlays were producing returns.

Meta, Microsoft and Apple report next week, and each is expected to update its own AI-spending plans before an audience whose tolerance for the number has visibly narrowed.