Tech futures fall as AI bets rattle markets

U.S. technology shares were poised for declines on Thursday as futures softened following weaker-than-expected results from Alphabet (GOOGL). The Google parent posted quarterly earnings and revenues that fell short of investor expectations, sending its stock down about 10% in after-hours trading and erasing a substantial portion of its market value. The disappointment focused attention on whether its sizable investments in artificial intelligence can be supported by sufficient sales growth.

Nasdaq-100 (NDX) futures fell 1.2% in the wake of the results, while S&P 500 futures slipped about 0.5%. Futures tied to the Dow (DJIA) Jones Industrial Average also edged lower, losing around 17 points, or 0.03%. The moves pointed to pressure on U.S. tech stocks at the open, in contrast with the modest gains seen during the prior cash session.

The market reaction underscored a sharp contrast between leading U.S. technology groups tied to the AI theme. While Alphabet’s results reignited doubts about the near-term payoff from heavy AI spending, Microsoft (MSFT) reported earnings that surpassed Wall Street expectations. Strong demand for Microsoft’s artificial intelligence tools and its cloud computing platform helped drive better-than-expected cash flows.

Microsoft’s shares rose about 3% in after-hours trading following its release, cushioning some of the negative sentiment around the sector. Even so, the outsized move lower in Alphabet’s stock and its impact on index futures kept overall tech sentiment cautious, with investors weighing whether robust AI demand can consistently translate into profitable growth.

The weakness in futures came after a positive close for major U.S. indices on Wednesday. The S&P 500 added 0.3%, the Dow (DJIA) Jones Industrial Average gained 0.2%, and the technology-heavy Nasdaq Composite climbed 0.3%. The Nasdaq 100 also finished 0.5% higher, while the Russell 2000 (RTY) advanced 0.4%.

Exchange-traded funds tracking these benchmarks reflected the same tone, with the SPDR S&P 500 ETF rising 0.6%, the SPDR Dow Jones Industrial Average ETF (DIA) up 0.2%, and the Nasdaq-100 tracking Invesco QQQ Trust (QQQ) gaining 0.5%. A decision by the Federal Reserve to keep interest rates unchanged helped ease some inflation concerns, supporting equities ahead of the latest tech earnings releases.

Alphabet’s earnings miss and the renewed focus on AI spending reverberated across Asian trading on Thursday. Asian shares, which had opened firmer, surrendered earlier gains as investors digested the mixed messages from major U.S. technology companies. Regional indices turned mixed, weighed down by large-cap technology names and their ties to AI demand.

In South Korea, Samsung Electronics reported that its third-quarter operating profit rose nearly ninefold to a record high, supported by strong demand for AI chips. Nevertheless, its shares fell more than 4%, pulling the KOSPI index down 2.6% after a sharp rally in the previous session. Across the region and in U.S. futures, the latest results from Alphabet and Microsoft heightened scrutiny of AI-related capital spending and the earnings needed to justify it.