US STOCKS-Wall St set for lower open as Alphabet results reignite AI spending fears

Microsoft

Yesterday 13:13

Futures down: Dow 0.24%, S&P 500 0.4%, Nasdaq 1.22%
Alphabet set to erase over $450 bln in market value, if losses hold
Microsoft rises as cloud growth, cash flow offer respite
Software stocks fall after Fortinet, ServiceNow results
Updates before US markets open
By Shashwat Chauhan and Utkarsh    Hathi
Oct 29 (Reuters) - US stocks were on track to open lower on Thursday as Alphabet's results rekindled worries about soaring AI costs, while investors assessed fresh inflation data following the Federal Reserve's decision to keep interest rates unchanged.
Alphabet GOOGL.O shares slid 11.5% in premarket trading, putting the company on track to lose more than $450 billion in market value if losses hold, after reporting disappointing search advertising results and a surge in cash burn as AI-related spending accelerated.
The Google parent's decline accounted for most of the over $660 billion in market value that the Nasdaq-100 .NDX was on track to erase if current losses hold.
"The positive AI effects must stay intact for years to come, or investors in Alphabet (and other hyperscalers) will eventually re-rate the multiples as the bottom-line profits fade," said Anders Bylund, a tech analyst at The Motley Fool.
Microsoft MSFT.O, however, climbed 1.8% after the company delivered a big cash-flow beat and forecast strong cloud growth. Although, the stock pared gains following media reports the company is planning to raise at least $25 billion through its first US investment-grade bond sale in more than nine years.
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 ANT.O disclosure of US IPO filing on Monday offered a short-lived reprieve, before those fears resurfaced.
Meanwhile, data on Thursday showed the Personal Consumption Expenditures Price index rose in line with the estimates of economists polled by Reuters. A separate reading showed the US economy grew faster than expected in the third quarter.
"The combination of still very strong and resilient economic growth, together with inflation and prices moving further away from the Fed's target, reinforce the expectation that October was a skip rather than a hold for the Fed," said Angelo Kourkafas, senior global investment strategist at Edward Jones.
The Fed on Wednesday held interest rates steady, as expected, opting to delay any changes to borrowing costs until after next week's US midterm elections.
Traders widely expect the US central bank to hike rates during its next meeting in December, according to data compiled by LSEG.
At 08:48 a.m. ET, Dow E-minis YMcv1 were down 129 points, or 0.24%, S&P 500 E-minis EScv1 were down 31.5 points, or 0.4%, and Nasdaq 100 E-minis NQcv1 were down 366 points, or 1.22%.
Other stock movers include cybersecurity firm Fortinet FTNT.O, down 26.1% after reporting third-quarter results. Software maker ServiceNow NOW.N dropped 18.7% after missing third-quarter profit estimates. The results also weighed on broader software-related companies.
Caterpillar CAT.N declined 11.4% after the company kept its annual sales forecast unchanged, raising questions over how long the data-center boom can drive growth for power-generation equipment, while drugmaker Eli Lilly LLY.N climbed 5.6% after forecasting annual revenue above Wall Street estimate.
Marvell Technology MRVL.O eased 12.1% after media reports said the company was in advanced talks to buy data-center optics maker Lumentum Holdings LITE.O. Lumentum shares rose 7.1%.
The broader semiconductor segment was also trading lower, with Nvidia NVDA.O down about 0.8%, AMD AMD.O sliding 2.7% and Intel INTC.O off 3.3%.
Intel INTC.O and Amazon AMZN.O are some of the major technology companies scheduled to report after markets close on Thursday.

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