Nasdaq futures slide as Alphabet miss tests AI trade

Nasdaq 100 futures fell before the open on Thursday, Oct. 29, after mixed results from Alphabet ↗ 0.73% and Microsoft ↗ 2.75% left investors weighing whether heavy AI spending is paying off, Reuters Thomson Reuters Corporation ↘ 3.79% reported. Software and cybersecurity stocks also dropped sharply. Fortinet ↗ 3.05% fell about a quarter and ServiceNow ↗ 0.77% lost nearly a fifth of its value in premarket trading. S&P 500 ↗ 2.37% futures also declined, while Dow futures edged higher.za.investing.com

Alphabet and Microsoft split

Alphabet shares slid in premarket trading after the company posted disappointing search advertising results and a sharp rise in cash burn as it spent heavily on AI infrastructure, according to Reuters. Both adjusted earnings per share and revenue missed expectations, and free cash flow came in at negative $9.07 billion. The company kept its full-year capital expenditure forecast at $195 billion to $205 billion, CNBC Comcast Corporation ↗ 0.49% reported. Quarterly capex rose to $51.4 billion, Investing.com reported.cnbc.com+2

Microsoft went the other way. Revenue grew 19% to $92.28 billion and Azure grew 48%, which eased some concerns about returns on AI investment, according to Investing.com. "Some investors are no longer giving all hyperscalers a 'free pass' to spend without limit," Jeremy Saltzberg of Check Capital Management told Reuters.sg.finance.yahoo.com+1

Software sell-off deepens

Fortinet beat forecasts with adjusted earnings of 91 cents a share on revenue of $2.08 billion, CTech reported. But services revenue of $1.31 billion missed estimates, and the company lowered its full-year services forecast, SiliconANGLE reported. The stock had more than doubled this year before the report, according to CTech.calcalistech.com+1

ServiceNow posted adjusted earnings of $1.00 a share, below the $1.02 analysts expected, on revenue of $4.11 billion. Its fourth-quarter revenue guidance also came in under Wall Street estimates, Investing.com reported. Bloomberg said the outlook did not ease fears that AI will disrupt the software maker. Zscaler ↗ 0.70% and Salesforce ↗ 0.60% were also among the decliners. Chipmakers including Nvidia ↘ 4.27%, AMD Advanced Micro Devices, Inc. ↗ 13.26% and Intel ↗ 5.49% traded lower too, Reuters reported.bloomberg.com+2

Fed holds, inflation data ahead

The Federal Reserve held rates steady on Wednesday, Oct. 28, and put off any change until after next week's midterm elections. Traders see a more than 81% chance of a rate hike in December, according to the CME ↘ 0.45% FedWatch Tool, as the oil shock from the Middle East conflict keeps inflation high, Reuters reported. Investors are also waiting for September's PCE inflation report and third-quarter GDP data later Thursday. Intel and Amazon Amazon.com, Inc. ↗ 2.94% report earnings after the close.za.investing.com

"The decision to hold seems to be a short pause to assess ahead of a likely policy hike in December," Jon Butcher of Aberdeen told Reuters.za.investing.com