Index Skids as Tesla, Alphabet Results Underwhelm

Major U.S. equities indexes tumbled as underwhelming earnings reports from Tesla (TSLA) and Google parent Alphabet (GOOGL) raised doubts about the sustainability of the rally in big-name tech stocks. Strength in the tech sector has been key to the ascent of the market gauges to their recently recorded record highs.

The S&P 500 dropped 2.3% on Wednesday, while the tech-heavy Nasdaq plunged 3.6%, marking the weakest performance for both indexes so far this year. The Dow closed the session 1.3% lower.

The sharpest losses in the S&P 500 belonged to shares of Lamb Weston Holdings (LW), which plummeted 28% after it reported weaker-than-expected revenue and earnings per share (EPS) for its fiscal fourth quarter. The manufacturer of frozen potato products cited declining restaurant traffic in the U.S. and key international markets amid higher menu prices as a reason for the lackluster performance. The company also guided for fiscal 2025 sales and profits falling below consensus estimates.

Tesla shares fell 12% after the electric vehicle maker reported a 45% year-over-year decline in profits for the second quarter, missing analysts’ expectations. Although quarterly revenue ticked higher from a year ago and exceeded forecasts, lower average selling prices and delivery numbers dragged on Tesla’s profitability. The company said it would focus on lowering production costs, developing lower-cost vehicles, and progressing on artificial intelligence projects including its humanoid robots and robotaxi.

Stocks that had been surging in 2024 amid lofty AI expectations posted significant losses during Wednesday’s rout. Enthusiasm about meeting power demand from AI data centers helped propel shares of power generator Vistra (VST) to an all-time high in May, but the stock has been trending downward since then, and it slipped 9.4%. Shares of server and data storage provider Super Micro Computer (SMCI) dropped 9.2%. Other heretofore AI darlings, including semiconductor giants, also fared poorly.

Shares of Roper Technologies (ROP), which provides software and tech-enabled products to a variety of markets, sank 7.4% after the company missed second-quarter revenue estimates and provided a lower-than-expected profit forecast for the current quarter. The soft outlook reflects restrained spending by Roper’s clients, with businesses limiting spending and putting off contract renewals amid economic uncertainties and elevated interest rates.

Enphase Energy (ENPH) shares notched Wednesday’s best performance of any S&P 500 stock, soaring 13% after the manufacturer of solar and EV charging equipment released its quarterly report. Although second-quarter sales and profits fell short of estimates, Enphase guided above expectations for the third quarter. The company touted progress in normalizing its inventory.

AT&T (T) also posted slightly lower-than-expected revenue and earnings for the second quarter, but the telecommunications giant exceeded forecasts for postpaid customer additions during the period, and its shares jumped 5.2%. AT&T’s free cash flow (FCF) also came in ahead of estimates, and management predicted that full-year FCF will surpass last year’s figure.

Shares of NextEra Energy (NEE) advanced 4.6% after the renewable energy provider beat quarterly profit estimates and provided an upbeat outlook. The company expressed confidence in its opportunities to replace less efficient forms of power generation and to fulfill the increasing demand for energy arising from various industries.