US STOCKS-Nasdaq futures fall 1% as Alphabet results intensify AI spending fears

Microsoft

Yesterday 09:54

Futures: Dow up 0.51%, S&P 500 down 0.26%, Nasdaq down 1.01%
Alphabet set to erase over $400 bln in market value, if losses hold
Microsoft rises as cloud growth, cash flow offer respite
Software stocks fall after Fortinet, ServiceNow results
Updates prices throughout, adds graphics
By Shashwat Chauhan
Oct 29 (Reuters) - Nasdaq futures fell about 1% on Thursday as Alphabet's results reignited concerns over mounting AI costs, while investors awaited a key inflation reading a day after the US Federal Reserve left interest rates unchanged.
Alphabet GOOGL.O shares slid 10.2% 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 MSFT.O, however, climbed 3.6% after the company delivered a big cash-flow beat and forecast strong cloud growth, offering fresh evidence that its hefty AI bets were working.
Investor enthusiasm for AI trade has been tempered this month by concerns that debt-fueled spending will be harder to justify as borrowing costs climb. The unveiling of Anthropic's US IPO filing on Monday provided a short-lived reprieve, before worries over AI-related spending resurfaced.
Other early movers included cybersecurity firm Fortinet FTNT.O, which tumbled 25% after reporting third-quarter results. Software maker ServiceNow NOW.N dropped 18.2% after missing third-quarter profit estimates.
Software-related companies such as Zscaler ZS.O and Salesforce CRM.N were among the laggards in sector-wide weakness.
Marvell Technology MRVL.O fell 9.7% after media reports said the company was in advanced talks to buy data-center optics maker Lumentum Holdings LITE.O. Lumentum shares rose 4.2%.
Memory chipmaker Micron Technology MU.O dropped 3.3%, tracking weakness in rival Samsung Electronics 005930.KS after the South Korean company reported its earnings.
The broader semiconductor segment was trading lower, with Nvidia NVDA.O down about 0.7%, AMD AMD.O sliding 2.8% and Intel INTC.O off 3.7%.
Intel INTC.O and Amazon AMZN.O are some of the major technology companies scheduled to report after markets close on Thursday.
Earnings due before the opening bell include reports from drugmakers Merck MRK.N and Eli Lilly LLY.N, construction equipment maker Caterpillar CAT.N and alternative investment managers Ares Management ARES.N and Blue Owl OWL.N.
At 05:18 a.m. ET, Dow E-minis YMcv1 were up 267 points, or 0.51%, S&P 500 E-minis EScv1 were down 20.5 points, or 0.26%, and Nasdaq 100 E-minis NQcv1 were down 303 points, or 1.01%.
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 decision to hold seems to be a short pause to assess ahead of a likely policy hike in December, rather than an indication that no further tightening is needed," said Jon Butcher, senior US economist at Aberdeen.
The market is now looking to the September Personal Consumption Expenditures report, the Fed's preferred inflation gauge due later in the day, for insights into the central bank's next policy moves. The third-quarter GDP reading is also set for release.
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 data compiled by LSEG.
Among other stocks, car e-commerce platform Carvana CVNA.N jumped 7.8% after its third-quarter revenue surpassed estimates, while Chipotle Mexican Grill CMG.N gained 6.7% after reporting better-than-expected quarterly comparable sales.

 (Reporting by Shashwat Chauhan in Bengaluru; Editing by Mrigank Dhaniwala and Shilpi Majumdar)
 ((Shashwat.Chauhan@thomsonreuters.com;))