Tech Stocks Take a Hit as AI Costs Weigh on Profits
The tech-heavy Nasdaq Composite plummeted 2.7% on Thursday, leading a broader market decline, as investors digested earnings reports from Meta and Microsoft. The S&P 500 fell nearly 1.9%, while the Dow Jones Industrial Average dropped 0.9%. Both indexes ended the month in the red, snapping a five-month winning streak.
AI Spending Concerns
Meta and Microsoft’s quarterly reports beat Wall Street estimates, but both companies flagged increased spending on artificial intelligence infrastructure, which raised concerns about profitability. Shares in both companies tumbled, with Meta falling over 4% and Microsoft dropping more than 6%. The sentiment spread to other tech giants, including Amazon and Apple, which rounded out the “Magnificent Seven” earnings reports.
Earnings Roundup
Apple reported earnings per share of $0.97 on revenue of $94.9 billion, beating expectations. However, a one-time charge related to a European General Court decision weighed on earnings per share. Intel reported a loss per share of $0.46 on revenue of $13.28 billion, beating revenue expectations but falling short on earnings per share due to impairment charges. Amazon’s stock popped 5% after reporting stronger revenue and earnings per share than expected.
Job Market Data
Initial jobless claims declined to a five-month low of 216,000, lower than estimates. The reading sets the stage for the all-important jobs report on Friday. The Personal Consumption Expenditures index, a key inflation indicator, largely matched expectations.
Market Outlook
The October jobs report is expected to show job gains slowed significantly during the month, with nonfarm payrolls rising by 105,000 and the unemployment rate holding flat at 4.1%. Mortgage rates rose for a fifth straight week, as pre-election volatility continued to rock the bond market. Technology stocks led the overall market declines, with the S&P 500 Technology Sector ETF sliding 2.8%.
Company News
Comcast said it has started exploring spinning off its cable networks into a separate company, while Stellantis reported third-quarter revenue and shipments that missed estimates. Super Micro Computer’s stock dropped nearly 14% after accounting firm Ernst & Young resigned during the company’s audit. Trump Media & Technology Group’s stock extended its double-digit declines, erasing all of its year-to-date gains.
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