S&P 500 and Nasdaq Fall as Meta and Microsoft Drop on AI Spending Concerns
The S&P 500 and Nasdaq slipped on Thursday, weighed down by sharp declines in Meta and Microsoft, as investor concerns grew over rising AI spending and the Federal Reserve’s uncertain policy outlook.
Meta Platforms plunged 11.8%, marking its biggest drop in nearly three years, after the Facebook and Instagram parent forecasted “notably larger” capital expenses for next year to support its expanding artificial intelligence investments.
Microsoft shares also dipped 3.5% after the company reported a record $35 billion in capital expenditures for its fiscal first quarter, warning that spending would continue to rise in the year ahead.
“We’re seeing a reset after high expectations for both the Fed and tech earnings were called into question,” said Ben Laidler, head of equity strategy at Bradesco BBI.
The declines came just one day after all three major U.S. indexes hit record highs—their fourth consecutive session of gains—driven by strong earnings reports and optimism about a softer monetary policy stance from the Fed.
On Wednesday, AI chipmaker Nvidia gave markets an additional boost after becoming the first publicly listed company to surpass $5 trillion in market capitalization.
Earnings Season Momentum Slows
Of the 222 S&P 500 companies that have reported earnings so far, 84.2% have beaten analyst estimates, according to LSEG data, exceeding the four-quarter average of 77%.
Investors are now turning their attention to upcoming earnings from Apple and Amazon, both members of the so-called “Magnificent Seven”.
Meanwhile, Alphabet, the parent company of Google, rose 4.9% after delivering strong advertising and cloud results, outperforming market forecasts.
Optimism around artificial intelligence has been a key catalyst behind this year’s U.S. stock rally, with top tech firms now making up roughly 35% of the S&P 500’s total weight.
At 11:48 a.m. ET, the Dow Jones Industrial Average rose 190 points (0.4%) to 47,822.04, while the S&P 500 fell 0.5% to 6,855.82 and the Nasdaq Composite dropped 1.14% to 23,685.59.
Fed’s Next Move in Doubt
The Federal Reserve delivered a widely expected 25-basis-point rate cut on Wednesday but cautioned that another reduction in December was “far from a foregone conclusion.”
As a result, traders trimmed the probability of another cut in December to 70%, down from 90% earlier in the week, according to futures data.
U.S.–China Trade Truce Offers Limited Relief
A new trade agreement between President Donald Trump and China’s Xi Jinping offered little boost to market sentiment. Trump agreed to roll back select tariffs on Chinese imports in exchange for Beijing resuming soybean purchases, maintaining rare earth exports, and stepping up efforts to curb fentanyl trafficking.
Other Market Movers
Outside of tech, Cardinal Health climbed 13.3% after raising its full-year profit outlook, while Chipotle Mexican Grill plunged 15.5% after cutting its annual sales forecast amid inflation and tariff pressures.
On the NYSE, declining stocks outnumbered advancers by 1.21-to-1, while on the Nasdaq, the ratio was 1.23-to-1. The S&P 500 recorded 30 new 52-week highs and 30 new lows, while the Nasdaq Composite saw 67 new highs and 141 new lows.
