Tech stocks led a retreat in US markets on Thursday as Meta’s revenue forecast spooked investors eyeing upcoming megacap earnings reports. The Nasdaq 100 futures dropped 1%, while S&P 500 and Dow Jones futures also slipped.
Meta, the parent company of Facebook and Instagram, saw its shares plummet over 12% after revealing plans to spend up to $10 billion on AI infrastructure investments. Investors were concerned about the timeline for these investments to translate into revenue, dragging down tech stocks across the board.
The disappointing performance from Meta cast a shadow on expectations for other tech giants, including Microsoft and Alphabet, which are set to report earnings after the bell on Thursday. The market had been hoping for a boost from these companies to reignite the recent stock rally.
In addition to the tech sector woes, investors are also awaiting an update on GDP, with expectations for economic growth to have eased to 2.5% in the first quarter compared to the previous year. Any signs of inflationary pressures could intensify the debate around potential Federal Reserve interest rate cuts.
Meanwhile, JP Morgan analyst Doug Anmuth highlighted concerns about Meta’s increased spending on AI initiatives, noting that while the long-term payoff could be significant, investors are wary of the comparison to previous scaling periods.
On a more positive note, Chipotle impressed investors with its ability to raise prices and introduce new menu items successfully. The company’s growth story continues to be strong, as reflected in its latest results.
However, the trucking and railroad industries have been struggling during earnings season, with companies reporting weak guidance and commentary. This has raised concerns about a potential economic slowdown, as these sectors are often seen as indicators of broader economic health.
Overall, the market remains cautious as investors digest the latest developments in tech, GDP, and corporate earnings. IBM shares also took a hit after the company reported unchanged sales in its consulting business, despite a positive reception to its HashiCorp deal. CFO Jim Kavanaugh emphasized the strategic importance of the deal and highlighted strong demand for consulting services, despite short-term revenue challenges.
