The losses so far today are largely led by tech, with Nasdaq futures down 0.7% currently. It comes despite Meta and Microsoft reporting earnings beat after the close, with Greg providing a comprehensive rundown of it all here.
Is it a case of month-end timing? Or perhaps investors weren’t all too happy with the surging costs into the AI space? Well, the latter has been a slight ongoing concern but big tech firms have the profits to back that up for now at least.
In the case of Meta, there was one downside stemming from its VR division i.e. Reality Labs. That particular division posted some $270 million in losses in Q3, so that might be part of the reason for concern.
But perhaps warning of a “significant acceleration” in AI-related expenditure is not something that investors would like to hear too.
Microsoft also added to that in saying they won’t be able to address AI capacity constraints until the second half of its fiscal year (which began in July). And they have already been piling on costs into the AI space with capital expenditure rising by another 5% to roughly $20 billion in the quarter.
Besides that, Microsoft is also warning of a slower growth forecast of its cloud business, Azure.
So, the details aren’t quite as rosy as what the numbers might suggest. But as is the case before, investors have the tendency to look past all of this in due time. As long as earnings continue to shine, they might be willing enough to keep turning a blind eye to this in the long haul.
Credit: Reuters