Microsoft, Meta drag tech stocks lower on concerns over AI spending

• Stocks fell sharply on Thursday, dragged down by technology.

• Microsoft and Meta stock fell on renewed concerns about AI spending.

• Jobless claims fell more than expected while the Fed’s preferred measure of inflation moved closer to 2%.

US stocks fell sharply on Thursday, with the tech-heavy Nasdaq down nearly 3%, as Meta and Microsoft faced heavy losses.

The sell-off in technology was sparked by recent earnings from huge companies that mostly beat estimates but disappointed investors in other areas and exacerbated concerns about massive investment in artificial intelligence.

The S&P 500 fell nearly 2% while the Dow Jones Industrial Average lost more than 370 points.

Here is where US indices stand at the closing bell at 4:00pm on Thursday:

Much of the disappointment is due to the tech giants’ directives.

Microsoft said it expects revenue for the current quarter to range between $68.1 billion and $69.1 billion, while analysts surveyed by FactSet expected $69.89 billion. The company attributed the slowdown in part to its investment in cloud computing capacity to meet demand for artificial intelligence.

Microsoft stock fell 6% to close at $406.35.

Meanwhile, Meta said it expects an increase in capital expenditures next year as it continues to spend on artificial intelligence, and raised its forecast for capital expenditures for this year to a range of $38 billion to $40 billion, from $37 billion to $40 billion.

However, analysts from UBS remain optimistic that increased spending will yield results.

“While Meta continues to point to a significant increase in capex for 2025, the results also highlighted multiple offsets to illustrate what investments will start to bring — as we said previously, the easiest element to note is the absolute increase in revenues,” the analysts wrote in a note on Monday. Thursday: “Dollar growth in 2024 of about $28 billion currently roughly matches the pandemic-induced acceleration from 2021 of about $29 billion.”

Meta shares lost 4% to close at 567.68%.

Also on Thursday, investors digested the Fed’s preferred measure of inflation. The personal consumption expenditures index fell to 2.1% year-on-year in September from 2.2% in August, but the core index – which excludes volatile food and energy prices – came in above expectations at 2.7%.

Meanwhile, unemployment claims fell more than expected to 216,000 last week, down 12,000 from the previous week. Economists had expected 230,000 claims.

The story continues