US STOCKS-Wall St falls as investors digest Alphabet's capex plans; software shares slide

By Pranav Kashyap and Twesha Dikshit

Feb 5 (Reuters) - The S&P 500 slid to near two-week lows and the Nasdaq sank to its lowest level in more than two months on Thursday, as the AI theme came under renewed pressure after Alphabet's spending plans and Qualcomm's downbeat forecast rattled investors.

Shares of the Google parent GOOGL.O fell 2.6% after Alphabet said it would double its capital expenditure this year, signaling another aggressive push to strengthen its position in the AI race.

Other mega-caps also came under pressure, with Microsoft MSFT.O and Tesla TSLA.O shedding about 2% each.

Big Tech firms are expected to collectively pour more than $500 billion into AI this year, amplifying investor concerns over lofty valuations and returns on investment.

"The AI trade which was the accelerant last year is perhaps the extinguisher this year with people realizing that AI is going to help certain kinds of companies but it is also going to hurt, particularly software, for example," said Melissa Brown, SimCorp's managing director of investment decision research.

Software and data services stocks, including ServiceNow NOW.N and Salesforce CRM.N, continued to trade lower, after a bruising selloff earlier this week on fears that fast-advancing artificial intelligence tools were denting demand for traditional software businesses.

Amazon AMZN.O slipped 3.5% ahead of results, due after market close, with traders likely to scrutinize its capital expenditure plans as well.

After Amazon, all eyes will be on Nvidia NVDA.O, last of the "Magnificent 7" companies to report. Its earnings are scheduled for February 25. Shares of the company were marginally up.

Qualcomm QCOM.O slid about 8.2% after forecasting second-quarter revenue and profit below estimates.

Amid a downbeat risk-off sentiment, silver XAG= and gold XAU= resumed a slide, with the white metal plunging almost 13%, after rebounding in the last couple of days from a sharp drop. Bitcoin BTC= fell below the $70,000 mark.

"If we go back a couple of weeks... we were already seeing a little bit of hesitancy and the market was still going up, but it was on lower volume. Then as earnings were reported and not quite as good as investors had hoped for, that was a catalyst for a sell off," Brown added.

As traders trimmed exposure to pricey AI winners, money continued to rotate into cheaper, overlooked parts of the market. The S&P 600 small-cap index .SPCY rose 0.2% and the S&P 400 mid-cap index .SP400 added 0.7%.

At 09:41 a.m. ET, the Dow Jones Industrial Average .DJI fell 0.56%, to 49,222.44, the S&P 500 .SPX lost 0.51%, to 6,847.32 and the Nasdaq Composite .IXIC lost 0.50%, to 22,790.03.

The S&P 500 software and services index .SPLRCIS fell 2%, logging its seventh consecutive decline, erasing roughly $830 billion in market value since January 28.

On the earnings front, Snap SNAP.K topped fourth-quarter revenue estimates, lifting its shares 5.6%.

Estee Lauder EL.N shares fell 17.5% after the Clinique owner forecast annual results below estimates. Tapestry TPR.N rose 8% after raising its annual profit forecast, while Hershey HSY.N added 8.8% on a better-than-expected annual profit forecast.

Hims & Hers HIMS.N shares jumped almost 13% after a Reuters report about the company launching a compounded copy of Novo Nordisk's Wegovy pill at $49 per month. Eli Lilly LLY.N shares dropped 6.8%.

With the federal government reopening after a partial shutdown that delayed key economic releases, the U.S. Bureau of Labor Statistics said on Wednesday that January's jobs report will be released next week.

The number of Americans filing new applications for unemployment increased more than expected for the week ended January 31, data from the Labor Department showed.