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U.S. stock index futures declined on Thursday, influenced by disappointing forecasts from tech giants Meta (NASDAQ:META) and Microsoft (NASDAQ:MSFT), which pointed to increased capital spending. By 04:01 ET (08:01 GMT), the Dow futures dropped 181 points (0.4%), the S&P 500 futures fell 41 points (0.7%), and the Nasdaq 100 futures lost 218 points (1%).
Tech Giants Signal High AI Spending, Slower Growth
Meta and Microsoft each dropped over 3% in premarket trading despite reporting strong earnings for the September quarter. The focus, however, shifted to warnings of heightened expenses related to artificial intelligence in the coming quarters, dampening enthusiasm. Microsoft cited slowing growth in its Azure cloud segment and sharply rising costs, especially in AI. Meanwhile, Meta highlighted an expected surge in AI spending for the next year, paired with a slowdown in user growth.
These developments have raised doubts over the immediate profitability of AI, given the substantial capital outlay required. Alphabet’s (NASDAQ:GOOGL) strong cloud revenue report provided some relief, as it did not caution on steep cost increases, balancing the overall tech sector’s outlook.
Focus Shifts to Upcoming Big Tech Earnings
The cautious projections from Meta and Microsoft have investors wary of earnings from other tech heavyweights like Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN), due later on Thursday. Negative sentiment also spread to the semiconductor sector, as AMD (NASDAQ:AMD) and Qorvo (NASDAQ:QRVO) reported weaker-than-expected performances.
In addition to tech, earnings reports from companies like Uber Technologies (NYSE:UBER), Mastercard (NYSE:MA), Bristol-Myers Squibb (NYSE:BMY), and ConocoPhillips (NYSE:COP) are set to release before the market opens.
Economic Indicators and Fed Expectations Add Pressure
Treasury yields spiked Wednesday after third-quarter GDP data showed the U.S. economy grew at a slower-than-expected pace, although still outperforming other advanced economies. Stronger-than-anticipated ADP nonfarm employment numbers for October suggest a resilient labor market, setting an optimistic tone for Friday’s official jobs report.
Adding to investor apprehension, the core PCE price index, the Federal Reserve’s preferred inflation measure, is due out Thursday. Markets anticipate a 25-basis-point rate cut by the Fed in next week’s meeting, which is expected to signal a cautious easing of monetary policy in response to persistent inflation pressures and mixed economic growth data.
