Shares of Alphabet Inc. (GOOGL) declined 1.1% on Friday, closing at $396.78 for Class A shares, as the broader technology sector faced headwinds from rising oil prices and climbing Treasury yields. The move came after Bill Ackman's Pershing Square Capital Management disclosed it had sold its entire stake in the Google parent company to fund a new position in Microsoft Corp. (MSFT), according to a person familiar with the matter.
The Nasdaq Composite dropped 1.54%, while the S&P 500 slipped 1.24% and the Dow Jones Industrial Average fell 1.07%. The sell-off was driven by a combination of factors, including a surge in oil prices and an uptick in bond yields, which pressured growth-oriented stocks. "The market had gotten way ahead of itself," said Kenny Polcari, chief market strategist at Slatestone Wealth.
Pershing Square's Move
Pershing Square's decision to exit Alphabet entirely and pivot to Microsoft was a key catalyst for the stock's underperformance. Ackman described Microsoft's valuation as "highly compelling," and the news sent Microsoft shares up 3.1% on the day. In contrast, Alphabet lagged the broader market, with Class C shares slipping 1.0% to $393.32. Other tech names also struggled: Amazon.com Inc. (AMZN) fell 1.1%, and Meta Platforms Inc. (META) gave up 0.7%.
Market Context
The broader market decline was fueled by macroeconomic pressures. Rising bond yields reduce the present value of future profits, which disproportionately affects high-growth companies priced on expected AI and cloud revenue. Oil prices also climbed, adding to inflation concerns and weighing on equities. The sell-off was not limited to Alphabet; it reflected a broader rotation out of crowded AI and technology positions.
Investors remain jittery about the possibility of further Federal Reserve rate hikes. Polymarket data shows a 32% probability of a rate hike in 2026 and a 67% chance of no rate cuts this year. On Kalshi, traders assigned a 39% probability that the next Fed rate hike will occur before 2027. Such a move would raise the federal funds rate, increasing borrowing costs across the economy.
Alphabet's Earnings and Outlook
Despite the stock's decline, Alphabet reported strong first-quarter results. Revenue rose 22% year over year to $109.9 billion, driven by a 63% jump in Google Cloud revenue to $20.0 billion. Net income surged 81% to $62.6 billion. CEO Sundar Pichai said 2026 is "off to a terrific start" and noted that demand for Search and Cloud remains robust.
However, costs are climbing. On its earnings call, Alphabet raised its 2026 capital expenditure guidance to between $180 billion and $190 billion, and warned that 2027 spending will be even higher. The capex is directed at data centers and chips to support AI compute demand, which management described as "unprecedented." The company cautioned that higher depreciation, energy costs, and data center expenses will squeeze profit margins.
Berkshire Hathaway's Countermove
In a contrasting development, Berkshire Hathaway Inc. (BRK.B) disclosed after the bell that it had boosted its Alphabet position to over $16.6 billion, making it one of Berkshire's largest equity holdings. This move signals that not all large investors are backing away from Alphabet, even as headlines focused on Ackman's exit.
Outlook
The near-term outlook for tech stocks remains uncertain. If oil prices stay elevated, yields continue to climb, and traders persist in selling AI-related names, further downside is possible. However, if interest rates stabilize and Alphabet's heavy AI investments begin to translate into tangible gains from cloud, advertising, and subscription services, Friday's decline may prove to be a temporary profit-taking event rather than a fundamental shift in the company's prospects.
