Nasdaq futures slide as Alphabet results intensify AI spending fears
By Shashwat Chauhan and Utkarsh Hathi
Oct 29 (Reuters) - Nasdaq futures fell about 1% on Thursday as Alphabet's results reignited concerns over soaring AI costs, while investors awaited a key inflation
reading a day after the US Federal Reserve left interest rates unchanged.
Alphabet shares slid 10.4% in premarket trading, putting the Google parent on track to lose more than $400 billion in market value if losses hold, after reporting disappointing search advertising results and a surge in cash burn as AI-related spending accelerated.
"Investors are starting to scrutinize monetization timelines versus the capital expenditure burn rates. Some investors are no longer giving all hyperscalers a 'free pass' to spend without limit," said Jeremy Saltzberg, VP and senior investment officer at Check Capital Management.
Microsoft, however, climbed 2.1% after the company delivered a big cash-flow beat and forecast strong cloud growth, offering fresh evidence that its hefty AI bets were paying off even as concerns mount over Big Tech's spending spree.
Investor enthusiasm for AI trade has been tempered this month by worries that debt-fueled spending will be harder to justify as borrowing costs climb. Anthropic's disclosure of US IPO filing on Monday offered only brief relief, before those fears resurfaced.
Among other movers, cybersecurity firm Fortinet tumbled 26.2% after reporting third-quarter results. Software maker ServiceNow dropped 19.6% after missing third-quarter profit estimates.
Software-related companies such as Zscaler and Salesforce were among the laggards in sector-wide weakness.
Construction equipment maker Caterpillar dropped 9.7% following third-quarter results, while drugmaker Eli Lilly climbed 3.9% after forecasting annual revenue above Wall Street estimate.
Marvell Technology eased 12.4% after media reports said the company was in advanced talks to buy data-center optics maker Lumentum Holdings. Lumentum shares rose 4.8%.
The broader semiconductor segment was trading lower, with Nvidia down about 0.5%, AMD sliding 2.5% and Intel off 3.5%.
Intel and Amazon are some of the major technology companies scheduled to report after markets close on Thursday.
At 07:02 a.m. ET, Dow E-minis were down 59 points, or 0.09%, S&P 500 E-minis were down 15.25 points, or 0.2%, and Nasdaq 100 E-minis were down 278.75 points, or 0.93%.
Meanwhile, the Federal Reserve held interest rates steady on Wednesday, as expected, opting to delay any changes to borrowing costs until after next week's US midterm elections while it awaits further data on inflation.
The September Personal Consumption Expenditures report, the Fed's preferred inflation gauge, is due later in the day, along with the third-quarter GDP reading.
Traders currently see a more than 81% chance the Fed will hike interest rates in December, according to the CME FedWatch Tool, as key inflation metrics remain elevated amid the oil shock linked to the Middle East conflict.
Money market participants are pricing in an additional rate hike by mid-2027, according to LSEG data.
Other stock movers include car e-commerce platform Carvana, up 7.5% after surpassing third-quarter revenue estimates. Chipotle Mexican Grill gained 7% after the burrito chain reported better-than-expected quarterly comparable sales.
(Reporting by Shashwat Chauhan and Utkarsh Hathi in Bengaluru; Editing by Mrigank Dhaniwala and Shilpi Majumdar)