Why Microsoft and Alphabet Stocks Slumped Today
What happened
For the most part, Microsoft (MSFT -1.60%) and Alphabet (GOOG -2.72%) (GOOGL -2.54%) have been outperformers on the stock exchange this year. On Monday, however, investors bucked that trend. They sent the former company's share price down by nearly 2% and the latter's two stock classes groundward by almost 3%. Both were far steeper falls than the 0.2% slip experienced by the S&P 500 index on the day.
Several factors were at play here. An article in The Wall Street Journal sounded a warning signal about artificial intelligence (AI), while a major stock index that Microsoft and Alphabet both belong to is going to be rebalanced.
So what
The AI article was published Monday morning in The Journal. Citing several cloud computing experts, the newspaper said that cloud infrastructure might not be sufficient to handle the rapid rise of AI functionalities.
Based on those experts' statements, the reporter, Isabelle Bousquette wrote that "today, only a small portion of existing cloud infrastructure is actually set up to support that. The rest is not."
Both Microsoft and Alphabet's core Google subsidiary have pushed assertively into the AI space. The former is a major investor in privately held OpenAI (the developer of the white-hot ChatGPT app), while the latter is developing a so-called "AI experiment" called Bard.
Now what
Compounding that, Nasdaq is on the cusp of rebalancing its influential Nasdaq 100 index. While it isn't replacing any of the component stocks that make up the index, it will rebalance their weightings. Microsoft and Alphabet are among the "magnificent seven" titles that currently make up over 50% of the index's weight.
Although it has not been made public how the weightings will change, it's very possible that the prominence of Microsoft, Alphabet, or even both will be reduced.
The adjustments will be made before market open on Monday, July 24, Nasdaq has said.
Source: The Motley Fool
