Market Turmoil: Tech Stocks Plummet Amid AI Spending Concerns
The US stock market took a drastic hit on Thursday, with the tech-heavy Nasdaq plummeting almost 3% as investors grew increasingly concerned about the hefty investment in artificial intelligence by tech giants. Microsoft and Meta, two of the industry’s biggest players, faced significant losses, dragging the entire market down.
Tech Giants’ Guidance Sparks Disappointment
Microsoft’s revenue forecast for the current quarter fell short of analysts’ expectations, sparking a 6% drop in its stock price to $406.35. The company attributed the slowdown to its investment in cloud computing capacity for AI demand. Meanwhile, Meta raised its capital expenditures forecast for the year, citing increased spending on AI, which led to a 4% decline in its shares to $567.68.
Fed’s Inflation Gauge Cools, Jobless Claims Fall
The Federal Reserve’s preferred inflation gauge, the personal consumption expenditures index, cooled to 2.1% year over year in September, while the core index rose higher than forecasts to 2.7%. On the employment front, jobless claims fell by more than expected to 216,000 last week, a decrease of 12,000 from the previous week.
Market Snapshot
At the 4:00 p.m. closing bell on Thursday, the major US indexes stood at:
- S&P 500: 5,705.37, down 1.86%
- Dow Jones Industrial Average: 41,763.19, down 0.9% (-378.35 points)
- Nasdaq composite: 18,095.15, down 2.76%
Other Market News
In commodities, oil futures rose, with West Texas Intermediate crude climbing 2.8% to $70.53 a barrel. Gold slipped 1.6% to $2,756 an ounce, while the 10-year Treasury remained flat at 4.278%. Bitcoin traded around $70,000.
Expert Insights
Despite the current sell-off, analysts from UBS remain optimistic about Meta’s increased spending on AI, citing potential revenue growth offsets. In contrast, legendary investor Jeremy Grantham believes AI hype is a bubble set to burst, following the path of tech manias throughout history.
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