Nasdaq futures fell on Thursday, after the mixed results of Alphabet and Microsoft prompted investors to reassess the expected return from huge spending on artificial intelligence, while attention is also focused on the expected inflation data, the day after the US Federal Reserve kept interest rates unchanged.
Alphabet shares fell by 10.5 percent in pre-market trading, after the company announced disappointing results in its core search engine advertising business, in addition to a significant acceleration in the depletion of cash, as it pumped huge resources into developing its artificial intelligence infrastructure, according to Reuters.
“Investors have begun to scrutinize expected timelines for commercial returns, compared to rates of capital spending and liquidity depletion,” said Jeremy Saltzberg, vice president and chief investment officer at Check Capital Management. Some investors no longer give all major companies in the field of cloud computing and artificial intelligence an open-ended exemption to spend without limits.”
On the other hand, Microsoft shares rose by 3.5 percent, after the company recorded cash flows that exceeded expectations by a large margin, and expected strong growth in its cloud services, which provided a new indication that its huge investments in artificial intelligence are beginning to bear fruit.
Among other stocks that witnessed early movements, shares of the cybersecurity company “Fortinet” fell by 25.4 percent following the announcement of third-quarter results, while shares of the software company “Service Now” fell by 19 percent after its profits fell below analysts’ estimates.
The list of declining stocks also included companies related to the software sector, including ZeSkiller and Salesforce, in light of widespread weakness in the sector.
Marvell Technology shares fell by 9.4 percent, after media reports indicated that the company is in advanced talks to acquire Lumentum Holdings, which specializes in optics technologies for data centers. On the other hand, Lumentum shares rose by 4.3 percent.
Semiconductor sector shares also tended to decline, as “NVIDIA” shares fell by 1 percent, “AMD” shares fell by 3.3 percent, while “Intel” shares fell by 3.6 percent.
Intel and Amazon, two of the largest technology companies, are scheduled to announce their results after the markets close on Thursday.
The list of companies scheduled to announce their results before the market opens includes the pharmaceutical companies Merck and Eli Lilly, the construction equipment company Caterpillar, in addition to the alternative investment companies Ares Management and Blue Owl.
By 04:09 a.m. EST, Dow Jones Industrial Average futures rose by 185 points, or 0.35 percent, while Standard & Poor's 500 futures fell by 31 points, or 0.41 percent. Nasdaq 100 futures fell by 365 points, or 1.22 percent.
In the context of monetary policy, the US Federal Reserve kept interest rates unchanged on Wednesday, as expected, preferring to postpone any adjustments to borrowing costs until after the US midterm elections scheduled for next week, pending further data related to inflation.
John Butcher, chief US economist at Aberdeen, said: “The decision to keep interest rates unchanged appears to represent a temporary pause to assess conditions before a possible rate hike in December, and not an indication that there is no need for further monetary tightening.”
All eyes will be on the September report on personal consumption expenditures, the Federal Reserve's preferred measure of inflation, due later Thursday. GDP data for the third quarter is also expected.
The CME Group's Fed Watch tool shows that traders currently expect, with a probability of more than 81 percent, that the Federal Reserve will raise interest rates in December, as key inflation indicators continue to rise amid the oil price shock resulting from the conflict in the Middle East.
Money markets are also pricing in the possibility of an additional increase in interest rates by mid-2027, according to data compiled by the London Stock Exchange Group (LSEG).
In other stocks, shares of the car e-commerce platform “Carvana” jumped by 9.2 percent, after its revenues in the third quarter exceeded analysts’ estimates. Shares of the Chipotle Mexican Grill restaurant chain also rose by 6.7 percent, following the announcement of quarterly comparable sales growth more than expected.
