Meta and Microsoft Highlight Rising AI Costs, Impacting Tech Stocks

Wall St ends lower as Meta, Microsoft highlight AI costs

STORY: U.S. stocks fell across the board Thursday after Microsoft and Meta Platforms highlighted growing artificial intelligence costs that could hit their earnings. The Dow dropped nearly one percent, the S&P 500 lost nearly two percent, and the tech-heavy Nasdaq slid nearly three percent. All of the 'Magnificent Seven' megacap technology stocks finished in the red with Microsoft the biggest loser, down six percent, while Meta was off four percent. Summit Place Finanical Advisors President Liz Miller calls the group fully valued but continues to see long-term potential. "I don't think this changes our outlook or the enthusiasm for AI. I'm going to call it a little bit of a course adjustment. All of these companies are established strong companies. They're used to giving us quarterly earnings and what they really said is we're on track, we're taking steps, but maybe it's going to take a little longer than you thought for us to be able to give you data on the revenue streams that follow. When we look at the stocks themselves and what they're down today, they're down just a little bit from the huge strength they had earlier in the year. So, I'm going to just call it a slight course adjustment." After the market close, 'Mag 7' member Apple beat Wall Street sales and profit expectations for its fiscal fourth quarter, bolstered by strong early sales of the iPhone 16. Another member of the club, Amazon, posted quarterly revenue and earnings that topped forecasts, setting up a potential bounce-back in shares Friday. On the economic front, a key inflation measure came in roughly in line with expectations while consumer spending increased a little more than expected. After the data, traders stuck to bets for a 25-basis-point interest rate reduction at the Federal Reserve's meeting next week.

Futures tumble as Meta, Microsoft cost warnings highlight AI trade risks

(Reuters) - Wall Street futures fell sharply on Thursday, as warnings from Meta Platforms and Microsoft about rising artificial intelligence-related costs dampened optimism around megacaps, which have been the market's primary driver this year. Shares of Facebook-owner slumped 4%, while Microsoft dropped 3.7% in premarket trading. Both companies beat earnings estimates in results reported after the bell on Wednesday. Markets were on edge ahead of the release of the Personal Consumption Expenditures index, the U.S. Federal Reserve's preferred inflation metric, for insight on how much the central bank could ease borrowing costs in the last two months of 2024. Nonfarm payrolls data is also due on Friday. Meta warned of "significant acceleration" in AI infrastructure investments and Microsoft predicted slower growth in its Azure cloud business, signaling that the company's already hefty AI investments were not enough to keep pace with capacity constraints. Though betting on AI-driven tech stocks propelled Wall Street to record highs this year, investor exuberance has meant stocks are trading at incredibly expensive valuations. Meta and Microsoft's warnings point to the challenges companies face in pleasing investors. "The market is unforgiving of any AI-related company that fails to significantly outperform. Meta is the latest stock to feel the wrath of investors, despite extending its track record of doing better than analyst forecasts on key financial measures," said Dan Coatsworth, investment analyst at AJ Bell. The other so-called Magnificent Seven megacap stocks fell, with Nvidia losing 1.5% and Alphabet down 1.1%, giving up some gains after soaring in the previous session following upbeat results. Amazon.com lost 1.3% and Apple dipped 0.3% ahead of quarterly results from both, due after market close. At 5:08 a.m. ET, Dow E-minis were down 251 points, or 0.59%, S&P 500 E-minis were down 50.25 points, or 0.86% and Nasdaq 100 E-minis were down 229 points, or 1.12%. The VIX, Wall Street's "fear gauge", rose to a more than three-week high as investors brace for more volatility from corporate results, the upcoming U.S. presidential election and the central bank's November meeting in the next few weeks. Ecommerce firm eBay fell 9% following downbeat revenue forecasts, while trading platform Robinhood slumped 10.3% after its third-quarter earnings missed expectations. Monolithic Power Systems dropped 9.7% after results, with other chip firms also sliding after a set of dour forecasts weighed on the sector's outlook. Earnings from companies including Uber Technologies, Mastercard, Bristol-Meyers Squibb and ConocoPhillips are due before markets open. (Reporting by Lisa Mattackal in Bengaluru; Editing by Pooja Desai)

Futures tumble as Meta, Microsoft cost warnings highlight AI trade risks

Oct 31 (Reuters) - Wall Street futures fell sharply on Thursday, as warnings from Meta Platforms and Microsoft about rising artificial intelligence-related costs dampened optimism around megacaps, which have been the market's primary driver this year. Shares of Facebook-owner (META.O), opens new tab slumped 4%, while Microsoft (MSFT.O), opens new tab dropped 3.7% in premarket trading. Both companies beat earnings estimates in results reported after the bell on Wednesday. Markets were on edge ahead of the release of the Personal Consumption Expenditures index, the U.S. Federal Reserve's preferred inflation metric, for insight on how much the central bank could ease borrowing costs in the last two months of 2024. Nonfarm payrolls data is also due on Friday. Meta warned of "significant acceleration" in AI infrastructure investments and Microsoft predicted slower growth in its Azure cloud business, signaling that the company's already hefty AI investments were not enough to keep pace with capacity constraints. Though betting on AI-driven tech stocks propelled Wall Street to record highs this year, investor exuberance has meant stocks are trading at incredibly expensive valuations. Meta and Microsoft's warnings point to the challenges companies face in pleasing investors. "The market is unforgiving of any AI-related company that fails to significantly outperform. Meta is the latest stock to feel the wrath of investors, despite extending its track record of doing better than analyst forecasts on key financial measures," said Dan Coatsworth, investment analyst at AJ Bell. The other so-called Magnificent Seven megacap stocks fell, with Nvidia (NVDA.O), opens new tab losing 1.5% and Alphabet (GOOGL.O), opens new tab down 1.1%, giving up some gains after soaring in the previous session following upbeat results. Amazon.com (AMZN.O), opens new tab lost 1.3% and Apple (AAPL.O), opens new tab dipped 0.3% ahead of quarterly results from both, due after market close. At 5:08 a.m. ET, Dow E-minis were down 251 points, or 0.59%, S&P 500 E-minis were down 50.25 points, or 0.86% and Nasdaq 100 E-minis were down 229 points, or 1.12%. The VIX (.VIX), opens new tab, Wall Street's "fear gauge", rose to a more than three-week high as investors brace for more volatility from corporate results, the upcoming U.S. presidential election and the central bank's November meeting in the next few weeks. Ecommerce firm eBay (EBAY.O), opens new tab fell 9% following downbeat revenue forecasts, while trading platform Robinhood (HOOD.O), opens new tab slumped 10.3% after its third-quarter earnings missed expectations. Monolithic Power Systems (MPWR.O), opens new tab dropped 9.7% after results, with other chip firms also sliding after a set of dour forecasts weighed on the sector's outlook. Earnings from companies including Uber Technologies (UBER.N), opens new tab, Mastercard (MA.N), opens new tab, Bristol-Meyers Squibb (BMY.N), opens new tab and ConocoPhillips (COP.N), opens new tab are due before markets open. Reporting by Lisa Mattackal in Bengaluru; Editing by Pooja Desai Our Standards: The Thomson Reuters Trust Principles., opens new tab

US stock futures fall as Meta, Microsoft underwhelm By Investing.com

Investing.com -- U.S. stock index futures pointed to a lower open on Wall Street on Thursday, with technology giants Meta (NASDAQ:META) and Microsoft (NASDAQ:MSFT) both lower as an increased outlook for capital spending largely offset positive quarterly earnings. Futures fell following a negative session on Wall Street, as anxiety over rising yields, an upcoming Federal Reserve meeting and a tight presidential race dented risk appetite. Weak earnings and guidance from some chipmakers also weighed on sentiment. More major tech earnings are due in the coming days, as are a batch of key economic readings. By 04:01 ET (08:01 GMT), the Dow futures contract was down 181 points or 0.4%, S&P 500 futures had shed 41 points or 0.7%, and Nasdaq 100 futures dropped 218 points or 1%. Microsoft, Meta fall on increased expenses outlook Tech giants Meta and Microsoft both fell more than 3% in aftermarket trade, even as their earnings for the September quarter beat expectations. But both firms forecast increased expenses on artificial intelligence in the coming quarters, while also missing expectations on other key metrics. Microsoft forecast slower-than-expected cloud business growth in the current quarter while clocking much higher expenses, especially on AI. Meta warned of a sharp increase in AI-related spending in the coming year, while user growth was at a slower pace in the September quarter than the prior one. The showings provided mixed cues to investors about just how much of an earnings driver AI was going to be, especially considering the copious amount of capital expenditure on the technology. They also largely offset positive cues from Goole parent Alphabet (NASDAQ:GOOGL), which clocked strong growth in its quarterly cloud revenue but did not warn of a drastic increase in costs. The mixed showings from Meta and Microsoft now put investors on guard over upcoming prints from Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN), which are due on Thursday. Beyond the megacap tech earnings, weak showings from some chip stocks- namely AMD (NASDAQ:AMD) and Qorvo (NASDAQ:QRVO) - also weighed on overall sentiment. Election, rate jitters weigh on Wall St Wall Street indexes fell on Wednesday amid pressure from a spike in Treasury yields, as continued signs of resilience in the U.S. economy spurred increased fears of relatively higher interest rates. Treasury yields rose sharply on Wednesday after gross domestic product data showed the U.S. economy grew slightly less than expected in the third quarter, but still faster than its peers in the developed world. ADP nonfarm employment data read much higher than expected for October, signaling a robust labor market, and setting a strong precedent ahead of nonfarm payrolls data on Friday. Before that, PCE price index data- the Fed's preferred inflation gauge- is due on Thursday. The Fed is set to meet next week and is widely expected to cut rates by a smaller 25 basis points.

Microsoft, Meta report; Samsung's chip unit disappoints - what's moving markets By Investing.com

Investing.com -- US stock futures edge lower as traders gauge quarterly reports from major technology groups. Both Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META) post higher-than-expected revenue and net profit, but worries persisted around the impact of their heavy expenditures on artificial intelligence. Elsewhere, Samsung (LON:0593xq) Electronics's (KS:005930) chip unit logs quarterly operating income that missed projections, although the memory-chip provider said it was making "meaningful progress" in securing a major supply deal. 1. Futures lower US stock futures pointed lower on Thursday as investors digested earnings from big-name technology companies and assessed a raft of economic data. By 04:31 ET (08:31 GMT), the Dow futures contract had fallen by 209 points or 0.5%, S&P 500 futures had slipped by 47 points or 0.8%, and Nasdaq 100 futures had shed 225 points or 1.1%. The main averages ended the prior session in the red, with markets looking ahead to key returns from software giant Microsoft and Instagram-parent Meta Platforms (more below). Shares in Alphabet (NASDAQ:GOOGL), the first of the so-called "Magnificent Seven" group of megacap tech stocks to report this week, rose on the Google-owner's better-than-anticipated third-quarter revenue and income. However, equities were weighed down by disappointing outlooks from chipmaker Advanced Micro Devices (NASDAQ:AMD) and wireless products maker Qorvo (NASDAQ:QRVO). Server manufacturer Super Micro Computer (NASDAQ:SMCI) slumped by more than 30% after it announced that EY has resigned as its auditor, denting the stock price of Nvidia (NASDAQ:NVDA). Super Micro, which packages GPU chips made by Nvidia into server systems, has hugely benefited from its relationship with artificial intelligence semiconductor titan. On the data front, markets were pouring through an advance estimate of third-quarter US gross domestic product that was below expectations and hotter-than-projected private payrolls growth. The numbers, along with a key nonfarm payrolls report later this week, are the last economic readings before the all-important -- and extremely close -- Nov. 5 presidential election. 2. Microsoft unveils soft guidance Shares in Microsoft sank in premarket US trading after the company's executives warned that revenues at its crucial Azure cloud computing unit were softening in the current quarter. The statement erased earlier gains in the stock. Investors were initially cheered by a 16% uptick in fiscal first-quarter revenues from the year-ago period to $65.6 billion, which topped Wall Street forecasts of $64.5 billion. Net income of $24.7 billion beat expectations as well. Undergirding the returns was quarterly revenue from Azure and its other cloud services, which gained by 33% from the previous year, although Chief Financial Officer Amy Hood flagged the segment's growth would slow to between 31% to 32% in its second quarter. Microsoft added that its capital expenses would expand because of ongoing investments into building out its AI capabilities. The company has turned itself into one of the foremost figures of the boom in the enthusiasm around the nascent technology, thanks in particular to Azure's success and a partnership with ChatGPT-maker OpenAI. 3. Meta's AI bets in focus Elevated AI expenditures were also in focus at Meta Platforms, with the Facebook-owner's Chief Executive Mark Zuckerberg saying the spending was showing "strong momentum." Meta especially highlighted an anticipated "significant" surge in capital investments in 2025 mostly due to the cash needed to run its AI infrastructure. Meta has been banking on AI as a tool to enhance its offerings and satisfy wary stakeholders following a lossmaking gamble by Zuckerberg on an avatar-filled metaverse. However, the pressure from investors remains high on not just Meta but also its megacap tech rivals. Concerns are beginning to rise around the timeline for the pay outs from these groups' massive AI bets as well as the impact the spending could have on recently fat margins. Shares in Meta dipped in premarket trading even though the firm unveiled higher-than-anticipated revenues of $40.6 billion and net profit of $15.7 billion. Attention now turns to e-commerce giant Amazon (NASDAQ:AMZN) and iPhone-maker Apple (NASDAQ:AAPL), which are scheduled to post their latest results after the closing bell on Thursday. Like their Big Tech peers, the outlook for AI investments will likely play a major role in these reports. 4. Samsung Electronics chip unit income misses estimates Operating profit at top memory-chip manufacturer Samsung Electronics's crucial semiconductor division slipped by 40% versus the prior quarter in the July to September period to 3.9 trillion won, missing estimates and falling short of rival SK Hynix. Samsung said the unit's profits were hit by one-off expenses, including the provision of employee incentives and foreign exchange headwinds related to a weaker US dollar. The numbers come after Samsung publicly apologized for disappointing returns from the chip business, which has grappled with stiff competition from SK Hynix in delivering the high bandwidth memory (HBM) chips utilized in AI hardware. However, Seoul-listed shares in Samsung eked out a marginal gain on Thursday after the company vowed to focus on producing the high-end processors and revealed it was making "meaningful progress" in winning approval from a "major customer." Sales of its HBM chips are seen rising in the fourth quarter. 5. Crude choppy Oil prices were choppy on Thursday after an unexpected draw in US inventories pointed to strength of demand in the world's largest crude consumer. By 04:30 ET, the Brent contract dipped 0.4% to $71.91 per barrel, while US crude futures (WTI) traded 0.3% lower at $68.39 a barrel. Both contracts rose more than 2% on Wednesday, after falling more than 6% earlier in the week on the reduced risk of a wider Middle East conflict. US gasoline stockpiles fell unexpectedly in the week ending Oct. 25 to a two-year low, according to data from the Energy Information Administration, while crude inventories also posted a surprise fall.