US tech stocks were set to open lower on Thursday after mixed results from Alphabet and Microsoft. Investors are weighing how much Big Tech spends on AI against how quickly that spending pays off. Nasdaq 100 futures were down 1.2% early on Thursday, Reuters reported .
S&P 500 futures fell 0.4%, while Dow futures rose 0.35%, as money moved out of technology shares and into other parts of the market.
Alphabet shares fell 10.5% before the market opened. The Google owner’s total revenue of $127.6bn fell just short of forecasts, as search advertising disappointed. It also burned through cash as it spent heavily on AI data centres.
Its spending on property and equipment reached a record $51.4bn in the third quarter, and free cash flow was negative $9.1bn, according to its quarterly results . Revenue at its Google Cloud unit more than doubled, however.
Microsoft moved the other way, rising 3.5%. Revenue at its Azure cloud business grew 48% to $33.2bn, according to the company’s results , and it forecast growth of 49% to 50% for the current quarter. Total revenue rose 19% to $92.3bn, ahead of forecasts, and its cash flow also beat expectations, Reuters reported.
“We still have demand that exceeds supply,” said Amy Hood, Microsoft’s chief financial officer.
Options traders had expected a big move in Microsoft shares around the results, as scrutiny of AI spending grew.
“Some investors are no longer giving all hyperscalers a ‘free pass’ to spend without limit,” Jeremy Saltzberg, senior investment officer at Check Capital Management, told Reuters.
Instead, he said, investors are now comparing each company’s spending with how soon it can turn AI into revenue.
Software stocks also came under pressure. Cybersecurity firm Fortinet fell 25.4%, and ServiceNow dropped 19% after its own quarterly results, while Salesforce and Zscaler were also lower. Chipmakers Nvidia, AMD and Intel all slipped.
Meta, which reported last week, is among the companies facing the same questions. Its latest filing showed about $825bn in future commitments , mostly for AI data centres and cloud computing.
Amazon reports its results after the US market closes on Thursday.
The moves come a day after the Federal Reserve held interest rates steady. Traders see a more than 81% chance of a rate rise in December, according to the CME FedWatch tool.
Inflation remains high, driven partly by an oil price shock linked to the conflict in the Middle East. Investors are now waiting for September’s PCE inflation figures, the Fed’s preferred measure, and the first estimate of third-quarter economic growth.
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