Alphabet sinks 6% as AI talent flight and capex fears hit tech stocks

Alphabet shares fell 6% to $346 on Monday after Nobel Prize-winning DeepMind researcher John Jumper left for Anthropic, deepening concerns about talent retention at Google's AI unit. The selloff dragged Amazon down 4% to $234 and weighed on Meta Platforms and Microsoft, as the broader S&P 500 slipped 0.15% to 7,496.

"If models become cheaper and more interchangeable, investors may question whether that spending is building a durable advantage or simply adding pressure to margins," Microsoft Chief Executive Officer Satya Nadella said in a Wall Street Journal interview published Sunday, adding that the AI market was becoming commoditized.

Jumper, who won the 2024 Nobel Prize in Chemistry alongside DeepMind co-founder Demis Hassabis for creating AlphaFold, was vice president and engineering fellow at Google. His departure follows that of Noam Shazeer, a co-lead of Google's Gemini AI models, who left for OpenAI last week. Alphabet's first-quarter free cash flow fell 47% year over year to $10.12 billion, while Amazon's trailing free cash flow dropped 95% to $1.2 billion, as combined hyperscaler capital expenditure for 2026 tops $452 billion.

The selloff highlights a growing debate about whether massive AI infrastructure spending will generate proportional returns. Alphabet guided 2026 capital expenditures to a range of $175 billion to $185 billion, while Amazon flagged about $200 billion. Even with Monday's decline, Alphabet shares remain up 10% year to date, while Amazon has gained just 1%.

The tech-heavy Nasdaq 100 fell 0.25% to 30,334, underperforming the Dow Jones Industrial Average, which rose 0.56% to 51,883. The Russell 2000 gained 0.88% to 3,001, reflecting a rotation away from megacap tech into small caps.

Alphabet's day range spanned $341.72 to $358.92, with volume of 24 million shares. Reddit sentiment on the stock flipped from bullish 72 to bearish 32 within days, according to the r/stocks community, where a thread about Google losing two top AI researchers drew 470 upvotes.

Amazon's decline came despite AWS growing 28% in the first quarter to $37.59 billion, its fastest pace in 15 quarters. The company's first-quarter capital expenditure hit $44.2 billion, up 77% year over year. Chief Executive Officer Andy Jassy has framed the spending as targeting "seminal opportunities like AI, chips, robotics, and low earth orbit satellites."

Google users also reported outages on Gmail and YouTube on Monday, adding pressure on the stock. The Polymarket crowd priced a down close for Amazon on Monday at 98% probability, with the most likely week-ending level clustering near $232.

Investors are watching for a potential Gemini Pro release before month-end, which carries 61% odds according to Polymarket, as a possible trigger to shift the narrative on Alphabet stock.

This article is for informational purposes only and does not constitute investment advice.